APPENDIX 4E PRELIMINARY FINAL REPORT YEAR ENDED 30 … · 2019-08-27 · ABN 90 137 363 636 P a g e...

ENERGY ACTION LIMITED ABN 90 137 363 636

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Energy Action Limited ABN 90 137 363 636

FINANCIAL REPORT FOR THE FULL YEAR ENDED 30 JUNE 2019

APPENDIX 4E – PRELIMINARY FINAL REPORT

YEAR ENDED 30 JUNE 2019

Energy Action Limited (ASX : EAX) – ACN 137 363 636

1. Results for announcement to the market

% change 30-Jun-19 30-Jun-18

(Restated)*

Revenue from ordinary activities (22%) 24,801,100 31,767,320

Statutory Profit/(Loss) after tax attributable to members (471%) (12,092,885) 3,260,674

Operating Profit/(Loss) after tax attributable to members (69%) 1,005,334 3,260,674

Basic earnings per share (Statutory) (471%) (46.59c) 12.56c

Diluted earnings per share (Statutory) (479%) (46.59c) 12.28c

Basic earnings per share (Operating) (69%) 3.87c 12.56c

Diluted earnings per share (Operating) (68%) 3.87c 12.28c

*Figures restated on adoption of AASB15, AASB9 and changes in relation to sales commission expense. Refer to note

2.2 in the Financial Report for further information.

2. Dividends

Cents per share Franked amount per

share

Payment date Record date

2019 final dividend NIL NIL - -

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Brief Explanation of Statutory and Operating Profit Statutory Profit / (Loss) and Statutory Earnings per share are prepared in accordance with Australian Accounting Standards and the Corporations Act. Statutory Loss after tax of $12,092,885, was 471% lower than FY18 Statutory Profit of $3,260,674. FY18 Statutory Profit after tax did not include Significant Items, while FY19 statutory loss include $13,098,217 of Significant Items. Further details are included in the Directors’ Report. Operating Profit after tax for the year ended 30 June 2018 was $1,005,334, a 69% decrease from the prior year Operating Profit after tax of $3,260,674.

Operating Profit after tax is defined as statutory loss excluding significant items is reported to give information to shareholders

that provide a greater understanding of operating performance by removing Significant Items and facilitating a more

representative comparison of performance between financial periods. Further details are included in the Directors’ Report.

3. Net tangible assets

30 June 2019 30 June 2018

(Restated)

Net tangible assets per share^

$(0.094) $(0.149)

^ Excludes goodwill, customer relationships and internally generated software. Net tangible assets totalling $2.43 million as at 30 June 2019

($3.86 million as at 30 June 2018).

4. Status of audit

An unqualified, signed Audit Opinion is included within the attached Financial Report.

All other information required to be disclosed by Energy Action in the Appendix 4E is either not applicable or has been

included in the attached financial report.

Please also refer to the ASX results announcement and results presentation.

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FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019

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Financial Report for the Year Ended 30 June 2019

Table of Contents

Corporate information .................................................................................................................................................... 5

Directors’ Report ............................................................................................................................................................ 6

Auditor’s Independence Declaration ............................................................................................................................ 16

Remuneration Report (Audited) ................................................................................................................................... 17

Financial Statements ................................................................................................................................................... 26

Consolidated Statement of Comprehensive Income .................................................................................................... 26

Consolidated Statement of Financial Position .............................................................................................................. 27

Consolidated Statement of Changes in Equity ............................................................................................................. 28

Consolidated Statement of Cash Flow ......................................................................................................................... 29

Notes to the Financial Statements for year ended 30 June 2019 ................................................................................ 30

Note 1: Corporate Information...................................................................................................................................... 30 Note 2: Summary of Significant Accounting Policies .................................................................................................... 30 Note 3: Significant Accounting Judgements, Estimates and Assumptions ................................................................... 46 Note 4: Segment information ....................................................................................................................................... 47 Note 5: Revenue, Other Income and Expenses ........................................................................................................... 48 Note 6: Income Tax Expense ....................................................................................................................................... 50 Note 7: Earnings per Share ......................................................................................................................................... 51 Note 8: Dividends ......................................................................................................................................................... 52 Note 9: Cash and Cash Equivalents ............................................................................................................................ 53 Note 10: Trade and Other Receivables ........................................................................................................................ 53 Note 11: Property Plant and Equipment ....................................................................................................................... 55 Note 12: Intangible Assets ........................................................................................................................................... 56 Note 13: Other Assets .................................................................................................................................................. 57 Note 14: Trade and Other Payables ............................................................................................................................ 58 Note 15: Tax ................................................................................................................................................................ 59 Note 16: Provisions and other liabilities ....................................................................................................................... 60 Note 17: Loans and Borrowings ................................................................................................................................... 60 Note 18: Issued Capital and Reserves ......................................................................................................................... 61 Note 19: Capital and Leasing Commitments ................................................................................................................ 65 Note 20: Cash Flow Information................................................................................................................................... 66 Note 21: Related Party Disclosures ............................................................................................................................. 67 Note 22: Financial Risk Management .......................................................................................................................... 68 Note 23: Auditors’ Remuneration ................................................................................................................................. 72 Note 24: Information relating to Energy Action Limited (“the parent entity”) ................................................................. 72 Note 25: Events After the reporting period ................................................................................................................... 73

Director’s Declaration ................................................................................................................................................... 74

Independent audit report to members of Energy Action Limited .................................................................................. 75

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Corporate information ACN: 137 363 636

Directors

Murray Bleach - Non-Executive Chairman

Nitin Singhi – Independent Non-Executive Director

John Mackay AM – Independent Non-Executive Director (resigned 30 June 2019)

Paul Meehan – Non Executive Director

Mark de Kock – Independent Non-Executive Director

Company Secretary

Anna Sandham

Registered Office and principal place of business

Level 5, 56 Station Street

Parramatta NSW 2150

Share register

Link Market Services Limited

Level 12

680 George Street

Sydney NSW 2000

Energy Action Limited shares (EAX) are listed on the Australian Securities Exchange (ASX)

Solicitors

DLA Piper

No 1 Martin Place

Sydney NSW 2000

Bankers

Commonwealth Bank of Australia

Level 3, 101 George Street

Parramatta NSW 2150

Auditors

Ernst & Young

200 George Street

Sydney, NSW 2000

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Directors’ Report

Your Directors present their report, together with the financial statements for Energy Action Limited (the “Company”) and its

consolidated entities (the “Group”), for the financial year ended 30 June 2019.

Directors

The names and details of the Company’s Directors in office during the financial year and until the date of this report are as

follows. Directors were in office for this entire period unless otherwise stated.

Murray Bleach (Non-Executive Chairman)

Qualifications – Bachelor of Arts (Financial Studies) and Master of Applied Finance - Macquarie University, Institute of

Chartered Accountants, Graduate Member of the Australian Institute of Company Directors.

Experience – Board Member since 2012, Chairman since 2015

Special Responsibilities – Member of each of the Audit & Risk Management and Nomination & Remuneration Committees

Directorships held in other listed entities currently and during the three prior years to the current year:

Carlton Investments Ltd – Independent Non-Executive Director (appointed 2 December 2014)

Other Directorships and interests - Partner in Alfred Street Investment Partners, Chairman of AddVenture Fund.

Paul Meehan (Non-Executive Director)

Qualifications – Diploma of Law (SAB), University of Sydney

Experience – Board member since 2003

Special Responsibilities – Member of each of the Audit & Risk Management and Nomination & Remuneration Committees.

Directorships held in other listed entities currently and during the three prior years to the current year: nil

Other Directorships and interests - Director of Meehans Solicitors Pty Ltd, Non-executive Director of Commercial First Realty

Pty Ltd T/as LJ Hooker Commercial Macarthur.

Nitin Singhi (Independent Non-Executive Director)

Qualifications – Bachelor of Economic and Master of Laws – University of Sydney, Member of the Australian Institute of

Company Directors

Experience – Board Member since 2015

Special Responsibilities – Chairman of each of the Audit & Risk Management and Nomination & Remuneration Committees.


Other Directorships and interests - Managing Director of Horizon Private Capital Partners, Director of TiE Sydney, Director of

Sport and Leisure Education Group Pty Limited.

Mark de Kock (Independent Non-Executive Director) Qualifications – Bachelor of Science (First Class Honours) in Electronic Engineering from University College London, Executive

MBA from the Australian Graduate School of Management, Member of the Institution of Engineering and Technology.

Experience – Nominee Director of Microequities from 2015 – February 2019. Non-executive Director from February 2019 to

June 2019. Independent Non-executive Director since 1 July 2019.

Special Responsibilities – Member of each of the Audit & Risk Management and Nomination & Remuneration Committees


Other Directorships and interests – Director, Frontier Data Centre Ltd.

John Mackay (Independent Non-Executive Director, resigned 30 June 2019)

Qualifications – Bachelor of Arts Administration / Economics from University of Canberra, Honourary Doctorate from University

of Canberra.

Experience – Board Member from July 2017 until June 2019

Special Responsibilities – Prior to his resignation, a Member of each of the Audit & Risk Management and Nomination

Committees and Chair of the Remuneration Committee.

Directorships held in other listed entities currently and during the three prior years to the current year:

Speedcast International – Independent Non-Executive Chairman (appointed to the Board in 2013 and as Chairman in 2014),

Independent Non-executive Chairman, CommsChoice Group Ltd, formerly Director of CIC Australia (now part of Peet Limited).

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Interests in the shares and options of the Company and related bodies corporate

As at the date of this report, the interests of the directors in the shares and options of Energy Action Limited were:

Number of ordinary shares Number of options over

ordinary shares

Murray Bleach 2,700,700 -

Paul Meehan 4,792,846 -

Nitin Singhi 3,000 -

Mark de Kock 50,000 -

Company Secretary

The following person held the position of Company Secretary at the end of the financial year:

Anna Sandham – Bachelor of Economics, University of Sydney; Graduate Diploma of Applied Corporate Governance,

Governance Institute of Australia, Chartered Secretary

Dividends recommended: Cents per share $

Ordinary shares

Final 2019 dividend NIL NIL

Interim 2019 dividend NIL NIL

Final 2018 dividend paid 27 September 2018 4.00 1,038,165

Operating and Financial Review

The Board presents the 2019 Operating and Financial Review, which has been designed to provide shareholders with a clear

and concise overview of Energy Action’s operations, financial position, business strategies and prospects. The review also

provides contextual information, including the impact of key events that have occurred during the FY19 financial year and

material business risks faced by the business so that shareholders can make an informed assessment of the results and

prospects of the Group.

Our business model

Energy Action’s core business strategy and purpose is:

“To help our clients understand, and take control of, their energy needs”

We have the power to help business save on energy costs, reduce emissions and increase the value of their assets. Our power

comes from:

Our expertise ‐ a national team with knowledge and capability to offer better ways of buying, using and generating energy

Our independence ‐ to fight for a better deal, ensure “apples” to “apples” comparison and that retailers and providers deliver what they promise

Our systems and processes ‐ that ensure automated and reliable delivery of valuable information, validated bills, tariff reviews and insights.

Energy Action’s principal activities are providing integrated energy management services to a diverse base of Commercial,

Industrial and small and medium sized business customers. Energy Action provides the following services:

Broking or Consulting using a range of procurement methodologies including auctions (via the Australian Energy

Exchange), tenders (small and large market), progressive and structured purchasing, corporate power purchase

agreements ;

Manage client energy contracts, including account management, liaison with their retailer, validating their bill,

ensuring the right tariff and helping them to understand how they are using energy;

Manage and identify opportunities to lower usage and emissions with business and building monitoring, audits and

energy efficiency initiatives;

Help clients generate and manage self-sufficiency with solar and batteries or corporate power purchase agreements;

Help clients increase the value of their assets with embedded networks, microgrids, solar and building ratings

improvements

Initially founded in 2000, Energy Action listed on the Australian Securities Exchange on 13 October 2011.

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2019 financial performance

The Group generated a statutory net profit/(loss) after tax (NPAT) of ($12.09) million for the year ended 30 June 2019, a

decline compared to a statutory NPAT of $3.26 million for the year ended 30 June 2018.The FY19 results included significant

items of $13.1 million (FY18:NIL), resulting in operating net profit after tax for the year ended 30 June 2019 of $1.01 million,

compared to $3.26 million for the pcp, a decrease of 69%.

A reconciliation of the Group’s Statutory NPAT to Operating NPAT and EBITDA is shown in the table below:

NPAT EBITDA

$ 30 June 2019 30 June 2018

(Restated) Variance 30 June 2019

30 June 2018 (Restated)

Variance

Statutory balance after tax (12,092,885) 3,260,674 -471% (10,028,320) 6,664,056 -250% Add back Significant Items after tax:

Strategic Review 265,086 - -100% 365,634 - -100%

Restructuring costs* 657,229 - -100% 906,523 - -100%

Accelerated D&A** 1,252,357 - -100% - - 0%

Other Significant item*** 72,500 - -100% 100,000 - -100%

Impairment of Goodwill 9,944,796 - -100% 9,944,796 - -100%

Impairment of Software 906,250 - -100% 1,250,000 - -100%

Operating balance after tax 1,005,334 3,260,674 -69% 2,538,633 6,664,056 -62%

* Costs associated with restructuring and closure of rental premises

**Accelerated Depreciation & Amortisation on specific items of Software and Customer Relationships ***Cost for PAS onerous projects

Key Financial Metrics

FY19 FY18

(Restated) Variance

Revenue $24.80m $31.77m -22%

Operating EBITDA $2.54m $6.66m -62%

Operating EBITDA margin 10.2% 21% -10.8 ppt

Operating NPAT $1.01m $3.26m -69%

Operating Cash flow1 $3.9m $6.9m -43%

Statutory NPAT -$12.09m $3.26m -471%

1Operating Cash Flow is defined as Operating Cash Flow before Interest, Tax and Significant Items

Revenues

Revenues declined by 22% versus the previous period, with a decline in Procurement 35%, a decline in Contract Management and Environmental Reporting (CMER) 7% and decline in Projects and Advisory Services (PAS) of 36%, in line with the repositioning of the PAS division.

Revenue $ FY19 FY18

(Restated) vs FY18 $ vs FY18 %

Procurement 6,419,299 9,872,786 (3,453,487) -35%

CMER 14,165,024 15,256,838 (1,091,814) -7%

PAS 4,216,777 6,637,696 (2,420,919) -36%

Total Revenue 24,801,100 31,767,320 (6,966,220) -22%

Revenue for the full year decreased from $31.77 million to $24.80 million mainly as a result of the following:

Procurement revenues declined 35%, driven by a 34.9% decrease in the number of Auctions performed to 854 (down from 1,311 in the pcp) and a decrease in the average $/MWh of 12.7% to $77.53. In line with our contracting guidance, contract duration was 25.9 months largely in line with the pcp of 26.1 months. Tariffs and Tenders also saw a decline in volumes, and structured products declined 4%.

Contract Management and Environmental Reporting (CMER) revenue declined by 7% with a decline of -793 in the

sites under management in Metrics services, offset by the gain in Bureau Services from the retail billing services

provided to CS Energy. Work is continuing to improve the customer value of the CMER service and arrest this decline

including a refreshed portal, the introduction of Metrics for small sites, and improved service delivery. Embedded

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Networks tenancies under management grew from 1,378 in June 2018 to 2,377 at the end of June 2019 as 999 new

centres were added.

PAS revenues decreased $2.4 million, 36% vs the pcp across the full range of services with operating performance

impacted by high staff turnover and the repositioning of the PAS division being announced on 2 April 2019. All

activity relating to head contracting on projects, project management, independent commissioning agent and

engineering contracts (including upgrades), which were often underperforming areas of the PAS division will cease.

The newly positioned Advisory division will focus on optimising energy efficiency for commercial buildings, as well as

environmental reporting and NABERS rating services for property portfolio clients. The decline in revenues was

somewhat offset by lower costs of goods sold, down $1.07 million, with reduced project delivery.

Operating expenditure

Operating overheads (net of significant items) totalled $19.8 million, compared to $22.2 million, a reduction of $2.4 million

(12%), with the action to adopt a leaner management structure and reduce operating costs. The good cost control has partially

offset the decline in revenue resulting a decline in EBITDA margin to 10.2%, down 10.8 percentage points. In particular:

Employment costs were $1.6 million lower than pcp primarily as a result of :

o A flattening of the management structure reducing leadership by 5 FTE and resulting in forecasted savings

in excess of $1 million per annum from FY20, with some savings achieved in the second half of FY19.

o The Company continues to expand its offshore resources replacing on-shore transactional roles as

appropriate with 17 FTE in FY19.

o The number of employees in the PAS business reduced by 27 FTE.

o Investment in recruiting additional operational staff, often with relevant industry experience, to underpin

service delivery improvements and ensure improved customer service outcomes.

Closure of 4 rental premises, with consolidation of 3 office locations into Sydney and Melbourne and the Perth office

relocating into a flexible serviced office. This will result in cost savings of approximately $0.2 million per annum.

Reduction of Directors fees by 40% resulting in annualised savings of $0.126 million effective 1 February 2019.

Ongoing strict cost control across all discretionary spend areas.

A decline in operating D&A (net of significant items) of $0.6 million with accelerated depreciation and amortisation

from the reassessment of customer relationships and specific software useful life to 30 June 2019. (FY18: $1.56 million)

Cashflows

Operating Cash flow was $3.9 million, down 43% on pcp, however continuing the strong underlying cash generation in the

business. The Company has continued an ongoing focus on working capital management, achieving an operating cash flow

conversion of 155% to operating EBITDA.

Reconciliation of Operating Cash Flow before interest, tax and significant items

30 June 2019 30 June 2018 (Restated)

Statutory operating cash flow 2,702,643 5,273,306

Add back:

Taxes paid 168,952 1,150,702

Interest paid / (received) 405,679 468,118

Cash flows related to significant items 666,088 -

Operating cash flow before interest, tax and significant items 3,943,362 6,892,126

Operating EBITDA 2,538,633 6,664,056

Operating cash flow as % of Operating EBITDA 155% 103%

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The group incurred capital expenditure of $1.85 million during the year, of which $1.73 million was on IT projects,

predominately completing the renewal of the enhancement of the Group’s core Customer and Contract Management

platforms.

The Company has signed a two year, $9.55 million market rate loan agreement, expiring September 2021 as an extension of the

facility agreement with the bank, on substantially the same terms and conditions as its previous Facility agreement. Funds can

be provided under the facility as loans, bank guarantees or as letters of credit with $9.3 million available to be utilised for

liquidity purposes. The facility limit was reduced from $12 million to $9.3 million during FY19, reducing liquidity by $2.7 million.

This will provide savings in borrowing costs of $48,000 per annum.

As at 30 June 2019, the Company had utilised $5.96 million of the facility comprising a loan of $5.72 million and bank

guarantees principally in relation to rental properties and guarantee provided on project works of $0.24 million. The Group had

$1.6 million of unrestricted cash at bank at 30 June 2019, and total undrawn facilities and cash of approximately $4.9 million.

Net debt was maintained in FY19, $4,381,959 as at 30 June 19, an increase of $118,112 over pcp.

Other

A Nil dividend was declared on 27 February, 2019 and 28 August, 2019 with a priority of reducing net debt as well as investing

in continuing to automate and streamline processes through digitisation and support the Company’s commercial focus on

scalable, platform-based services that add value to our clients.

The effective tax rate of 8.0% was primarily due to the addback of the goodwill impairment in addition to the change in the corporate tax rate from 30% to 27.5% as at 1 July 2018. This change resulted in a reduction of deferred tax liabilities of $0.169 million which has been included as a reduction in income tax expense.

The Group incurred significant items totaling $13,098,219. Of this amount $12,170,575 (93%) were non-cash items. These significant items net of tax effect were:

Impairment of goodwill of $9,944,796 related to previous acquisitions. A formal assessment of the carrying value of Goodwill has been undertaken. This assessment resulted in an impairment of 100% of Goodwill.

Impairment of software of $906,250. A formal assessment of the carrying value of Software has been undertaken. This assessment resulted in an impairment of $1.25 million of Software (before tax).

Accelerated amortization of customer relationships intangibles of $846,140 related to previous acquisitions and Accelerated amortization of software of $406,217. The Company has assessed the useful life of Customer Relationships and Software Development costs. This has resulted in the acceleration of Customer Relationship amortisation and specific Software Development amortisation to finish at the 30 June 2019.

Costs associated with an organisational restructure of $657,229 relates to the restructuring of the PAS division, the flatter management structure, and the closure of the rental premises in Sydney and Melbourne. Costs associated with the strategic review of $265,086.

Costs associated with PAS onerous project of $72,500.

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Forward revenue

The opening balance of forward revenue has been restated to $38.5 million at June 2018 as a result of the adoption of AASB 15

Revenue from Contracts with Customers. Auction revenue is now recognised in full at the time of the Contract, and accordingly

there is no longer any additional revenue recognised over the term of the contract for this line of business. Forward revenue for

the year ending 30 June 2019 has declined to $25.1 million with Procurement and CMER forward revenue declining with new

contract sales lower than roll-off revenue. The Company continues to focus on improving acquisitions, retentions, customer

service and enhancing the Contract Management & Environmental Reporting offering.

Operational Key Performance Indicators

FY19 FY18 % change

Procurement

No. of successful AEX auctions 854 1,311 -34.9%

Average AEX contract duration (months) 25.9 26.1 -0.2 mths

TWhs sold via Auction (annualised equivalent) 0.81 1.48 -45.3%

Average $/MWh $77.53 $88.85 -12.7%

Total Auction bid value1 $136m $285m -52.3%

No. of electricity tender events 27 47 -42.6%

No. of gas tender events 32 52 -38.5%

Contract Management & Energy Reporting (CMER) 30 June 2019 30 June 2018

Sites under current contract2 No.

Energy Metrics 4,699 5,492 -793

Bureau services 1,909 987 +922

Data only contracts (MP / MDA) 1,615 1,648 -33

Total Metrics sites under contract 8,223 8,127 +96

Average Metrics contract duration (months) 43.0 41.0 +2.0 mths

Embedded Network tenancies under management 2,377 1,378 +999

Total sites 10,600 9,505 +1,095

Total Company Future contracted revenue $25.1m $38.5m -46%

1 Electricity component of contract only, i.e. excluding network and other charges 2 Does not include contracts which are signed, but yet to commence service delivery.

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Operational Performance

Following the completion of the Strategic Review and the appointment of John Huggart as CEO in January 2019, the company focused on five key priorities to stabilise the company and focus on delivering its strong market position in core energy procurement and monitoring services and streamline the delivery of its energy efficiency solutions. The success of these key priorities include:

“Back to Basics” Progress

Sales Growth

Working with the mid-market sales team to accelerate acquisitions and retention of customers. A substantive change in sales and service model for the team has commenced.

First two phases of project has been completed. Retention rates for customers from January to June have increased substantively due to improved sales and sales management. For the three months June to August the number of auctions exceed the prior year.

Capability

The delivery of retail billing project which has now been completed.

Complete and in BAU.

The delivery of the replacement of Group’s core Customer and Contract Management Platforms.

The project is in the final stages of completion, with a planned “hypercare” period to follow and ensure any remaining system or training gaps are rapidly addressed.

The refresh of the Metrics platform for retention and growth in CMER.

Complete and in BAU.

Service

Improve customer interactions and delivery to achieve improved retention and net promoter outcomes.

Service delivery remains a continued focus to ensure customer expectations are met. Milestone reporting including Network Tariff Reviews and Budget estimates have now been on time for the past three months.

Profit

Continue to improve the operating margins of the PAS division, develop partnerships to assist with delivery of services to customers and strong performance and cost management.

Decision made to re-position PAS to Advisory Services, referral partners appointed for work previously undertaken by PAS. Benefits of a leaner and flatter leadership team with lower cost and continued cash and cost focus balanced with investment in ensuring support for recruiting skilled service delivery team and building capability.

Engagement Building a high performance culture. Significant improvement in engagement score to 65%.

Corporate Highlights

There have been a number of key operational highlights in the period that include:

Sales :

In the second half of FY19 the mid-market sales team has worked to accelerate the acquisition and retention of

customers. A substantive change in the sales and service model has been achieved including the establishment of a

campaign sales team and key deliverables. The results of this activity is seeing early improvements expected to continue

to rebuild into FY20.

An increase in embedded network tenancies under management of 999 (72%);

Completion of the Energy Strategy to guide the development of Stage 1 of Western Sydney Airport, a $5.3 billion Federal Government investment due to be operational in 2026. The strategy incorporated both demand and supply side measures to deliver an energy investment model for the Airport.

Capability :

The successful implementation of a large scale energy retailer billing system and customer portal on behalf of CS Energy.

The implementation is a multi-year contract, which involved the successful transfer and billing of several hundred sites

in less than three months. It is a scalable application of an improved project deployment approach, market leading

technology and energy data management processes to a growing market segment that was previously not accessible

to Energy Action;

Replacement the Group’s core Customer and Contract Management platforms in the final stages of completion. This

platform is expected to deliver key efficiencies and automation. The refresh of the Metrics platform for retention and

growth in CMER. This included a portal refresh as well as adding the functionality to view SME sites on the portal.

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Profit :

The reposition of the PAS division to eliminate loss-making activity and support the Company’s commercial focus on scalable, platform-based services that add value to our clients.

Flattening of the management structure reducing leadership by 5 FTE and resulting in forecasted annual savings in

excess of $1 million per annum from FY20, with savings flowing from the second half of FY19.

Expansion of the Business Processing Offshore team to 17 Full Time Equivalent (FTE) replacing on-shore transactional roles as appropriate.

Closure of 4 leased premises, with consolidation of 3 office locations into Sydney and Melbourne and the Perth office

relocating into a flexible serviced office. This will result in forecasted cost savings of $0.2 million per annum

Continued focus on Operating Cash Flow with the conversion of Operating EBITDA to Operating Cash Flow a healthy

155%.

Culture :

Establishment of Cultural Transformation Program to diagnose and enhance the organisational culture. Significant improvement

has been achieved in engagement with a June 2019 survey demonstrating a strong improvement.

Business strategy and prospects for future financial years

The new strategic priorities are “Foundations for Growth” with the primary aim of leveraging the value and efficiencies from systems investment, exit from un-profitable activities and improved focus on core business with the plan to increase the future contracted revenue.

Priorities “Foundations for Growth”

Sales Growth

Continuing with sales and customer management programs to lift retention rates and acquisition across all customer segments. Launch new products to key customer segments, including expansion of progressive purchasing clients and environmental reporting

Capability

Continue to develop the scalable platform to capture additional efficiencies and eliminate remaining legacy systems

Continued improvements in Metrics platform for customers to meet existing and emerging customer demand and develop energy insights underpinned by data management and analysis

Enhanced capability to assist small market customers

Service Improve customer interactions and delivery to achieve improved retention and net promoter outcomes

Profit Maintain disciplined performance management and cost control, lift the value of forward revenue, leverage the efficiencies of the newly built core systems and ensure Advisory business achieves commercial outcomes.

Engagement Building and maintaining a high performance culture

The Company is not providing formal earnings guidance.

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Risks to achieving financial outcomes in relation to future prospects

Energy Action identifies major risks using an enterprise wide risk program. Energy Action faces a wide variety of risks due to the

nature of the industry in which it operates. In relation to each risk, Energy Action has in place actions to reduce the likelihood of

the risk eventuation and / or to reduce, as far as practicable, the adverse consequences of the risk should it occur. Many of the

risks are influenced by factors external to, and beyond the control of Energy Action. Details of Energy Action’s main risks and

the related mitigations are set out below:

Risk Risk Description Potential consequences and mitigation strategies

Customer

Retention/Acquisi

tion

Failure to attract and retain

sufficient customers to sustain

the business

Major initiative completed during FY19 examining all aspects of sales

activity and identifying actions and plans to increase customer retention

and acquisition. Implementation of results completed mostly in FY19 with

monitoring and ongoing review continuing into FY20.

Increasing

competition

The risk that Energy Action is

unable to differentiate from

competitors.

Review of service offerings undertaken during FY19 and identifying

services to be discontinued and increasing focus on services to be retained.

Examples include Energy Procurement, mid-market Structured Products

and Contract Management and Energy Reporting services.

Failure to deliver

against customer

obligations.

The risk that Energy Action is

unable to meet its contractual

obligations to customers for the

delivery of services.

Potential earnings and reputational impact from failure to deliver

contracted services to be mitigated by exit from unprofitable markets,

improved business processes for delivery of ongoing services, including the

replacement of Energy Action’s core Customer and Contract Management

platforms, and increased risk management planning for customer

outcomes.

Earnings and Cash

Flow

The risk of failing to maintain

adequate earnings and funding

to finance growth objectives and

to generate adequate returns for

shareholders.

Mitigated by implementation of a focused back to basics strategy to

establish the core foundation for scale and growth including. This includes

the decision to re-position PAS, a leaner management structure, improve

sales growth, improve company capability, improve service delivery and

employee engagement through building a high performance culture. In

addition, mitigated by improved visibility of key performance indicators

and drivers of performance, timely and transparent market disclosures,

and maintenance of strong relationships with banking partners and

shareholders.

Occupational

Health & Safety

(OH&S)

The risk of not operating safely

and in accordance with relevant

legislation leading to an

employee injury.

Potential for employee injury and Company reputation addressed by OH&S

systems and practices. Mitigated by ongoing training and updates to OH&S

policies. OH&S risk also reduces consequent to Energy Action Advisory

restructure with the exiting (in progress) of projects including site works.

Employee

engagement and

performance

The risk of failing to attract and

retain the best talent available.

Impacts on performance due to unavailability of talent mitigated by staff

development plans, succession plans and remuneration strategies.

Loss of key staff

The risk of company performance

declining due to key staff either

leaving or being unavailable

unexpectedly or due to high

turnover of non-key staff

hampering performance due to

training lead times.

Mitigated by staff reviews, identification of points of vulnerability, cross

training and succession planning.

Legal risk –

Competition and

consumer law or

terms of the

company’s AFS

licence.

The risk of legal action following

a breach of the Competition and

Consumer Act or the terms of

Energy Action’s Australian

Financial Services Licence.

Likelihood of breaches reduced by training of all outward facing staff in

Consumer and Competition Law requirements. AFSL compliance system in

place. Procedures in place for monitoring and reporting of breaches and

potential breaches.

Cyber Security

Risk

Cyber-attack or similar event

involving unauthorised access to

EAX’s IT systems leading to denial

of systems and/or corruption of

data.

Procedures for systems recovery are in place including off site storage of

data. Systems restoration completed within 24 hours where a cyber

breach has occurred.

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Environmental issues

The Group’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a

state or territory.

Energy Action is committed to environmental best practice, and to the continual improvement of its environmental

performance, recognising its obligations both locally and globally, to the present and succeeding generations. Energy Action

aims to lead in defining best environmental practice, and will set its own demanding standards where none exist. Energy Action

is committed to implementing the requirements of all applicable Commonwealth, State and local environmental legislation and

regulations and, where possible, exceeding any relevant minimum requirements.

Energy Action aims to raise the environmental awareness of the public, governments, industry, and the general community by

promoting the concept of ecological sustainability and by openly recognising the ongoing need to move toward an ecologically

sustainable future.

Meetings of Directors

The number of meetings of Directors (including meetings of committees of Directors) held during the year and the

number of meetings attended by each Director was as follows:

Board Meeting Audit & Risk

Committee

Remuneration

Committee

Nomination

Committee

No. Eligible

to attend

No.

Attended

No. Eligible

to attend

No.

Attended

No. Eligible

to attend

No.

Attended

No. Eligible

to attend

No.

Attended

Murray Bleach 9 9 4 4 2 2 1 1

Paul Meehan 9 8 4 4 2 2 1 1

Nitin Singhi 9 9 4 4 2 2 1 1

Mark de Kock 9 8 4 4 2 2 0 0

John Mackay 9 9 4 3 2 1 1 0

Indemnifying Officers or Auditor

During or since the end of the financial year, the Company has given an indemnity or entered into an agreement to indemnify,

or paid or agreed to pay insurance premiums as follows:

The Company has paid premiums to insure each of the Directors against liabilities for costs and expenses incurred by them

in defending legal proceedings arising from their conduct while acting in the capacity of Director of the Company, other

than conduct involving a wilful breach of duty in relation to the Company.

To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of

its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No

payment has been made to indemnify Ernst & Young during or since the financial year.

Proceedings on Behalf of Company

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to

which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those

proceedings. The Company was not a party to any such proceeding during the year.

Non-audit Services

The Board of Directors, in accordance with advice from the audit and risk management committee, is satisfied that the

provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed

by the Corporations Act 2001. The Directors are satisfied that the services disclosed below did not compromise the external

auditor’s independence for the following reasons:

– all non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they do

not adversely affect the integrity and objectivity of the auditor;

– the nature of the services provided does not compromise the general principles relating to auditor independence in

accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical

Standards Board; and

– no fees were paid or payable to Ernst & Young for non-audit services provided during the year ended 30 June 2019.

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16

Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au

Auditor’s Independence Declaration to the Directors of Energy Action Limited

As lead auditor for the audit of Energy Action Limited for the financial year ended 30 June 2019, I declare to the best of my knowledge and belief, there have been:

a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Energy Action Limited and the entities it controlled during the financial year.

Ernst & Young

Ryan Fisk Partner 28 August 2019

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Remuneration Report (Audited)

The directors present the Remuneration Report for Energy Action Limited (“Company”) and its consolidated entities (“Group”)

for the year ended 30 June 2019.

1. REMUNERATION FRAMEWORK

1.1. Role of the Remuneration Committee

The Remuneration Committee ensures that the remuneration of directors and senior executives is consistent with

market practice and sufficient to ensure that the Group can attract, develop and retain the best individuals. The

committee review directors’ fees, and remuneration of the CEO and senior executives against the market, Group and

individual performance.

The committee consisted of four non-executive directors, namely Nitin Singhi (Chairman), Murray Bleach, Mark de Kock

and Paul Meehan. The committee charter is available on the Group’s website.

The committee oversees governance procedures and policy on remuneration including:

General remuneration practices,

Performance management,

Bonus and incentive schemes, and

Recruitment and termination.

Through the committee, the board ensures the company’s remuneration philosophy and strategy continues to be

designed to:

Attract, develop and retain Board and executive talent,

Create a high performance culture by driving and rewarding executives for achievement of the Group’s

strategy and business objectives, and

Link incentives to the creation of shareholder value.

In undertaking its work, the committee seeks advice as required.

1.2. Key Management Personnel

Key Management Personnel (“KMP”) are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director of the Company or subsidiaries. The following persons were KMPs during the financial year. Unless otherwise indicated, they were KMPs for the entire year.

1.2.1. Non-Executive directors Murray Bleach Non-Executive Chairman Paul Meehan Non-Executive Director Nitin Singhi Non-Executive Director Mark de Kock Non-Executive Director John Mackay AM Non-Executive Director (resigned effective 30 June 2019)

1.2.2. Senior executives (not directors of the board)

John Huggart Chief Executive Officer (appointed 1 January 2019)

Tracy Bucciarelli Chief Financial Officer (appointed 18 February 2019)

Ivan Slavich Chief Executive Officer (resigned effective 21 December 2018)

Michael Fahey Chief Operating Officer & Chief Financial Officer (resigned effective 27

February 2019)

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1.3. Remuneration Consultants

Where necessary, the Board seeks advice from independent experts and advisors including remuneration consultants.

Remuneration consultants are used to ensure that remuneration packages are appropriately structured and are

consistent with comparable roles in the market. Remuneration consultants are approved by, and recommendations

provided directly to, non-executive directors (the remuneration committee). When remuneration consultants are

engaged, the remuneration committee ensures that the appropriate level of independence exists from the Group’s

management. No remuneration consultants were used this year.

1.4. Long term incentive scheme

Purpose and type of equity awarded

The Group operates a long term incentive scheme (LTI) for its senior executives. The LTI is governed by the

Performance Rights and Options Plan (PROP), under which performance rights (not options) are granted to

participants. Each performance right entitles the participant to one share in Energy Action for nil consideration at the

time of vesting subject to meeting the conditions outlined below.

The LTI aligns key employee awards with sustainable growth in shareholder value over time. It also plays an important

role in employee recruitment and retention.

Number of instruments awarded

As at 30 June 2019, the PROP accounted for 0.1% (FY18 2.8%) of issued securities of the Group, made up of 33,334

(FY18 725,578) performance rights.

Valuation

The fair value of any LTI grant is a determined by an external valuation at the time of the grant.

Performance hurdles

For the 2019 LTI allocation, the two performance hurdles that apply to the Performance Rights for vesting were:

an Earnings Per Share (EPS) component (75% weighting) achieved by comparing the Company’s Actual

Operating EPS for the year ending on the relevant test date to the Company’s Budget Operating EPS ending

on the relevant test date. Fifty percent of the performance right that is subject to the relative performance

hurdle vests if the actual Operating EPS meets 95% of the Budgeted Operating EPS. One hundred percent

will vest if the actual performance meets or exceeds the Budgeted Operating EPS. If the actual EPS is

between 95% and 100% of Budgeted EPS, the percentage that will vest is determined on a linear basis.

a Total Shareholder Return (TSR) component (25% weighting) achieved by comparing the Company’s total

compounded return to the total compounded return of the S&P/ASX300 (Index) for the year ending on the

relevant test date. Fifty percent of the performance right that is subject to the relative performance hurdle

vests if the EAX total compounded return is equal to the total compounded return of the index over the

vesting period. One hundred percent will vest if EAX achieves a total compounded return of 1.10 times the

total compounded return of the Index over the vesting period. If EAX’a total return is in between the total

compounded return of the Index and 1.10 times the total compounded return of the index, the percentage

that will vest will be determined on a linear basis.

LTI Outcomes

Neither the TSR nor EPS hurdles were met for the year ending 30 June 2019. The Energy Action TSR for the period 1 July

2018 to 30 June 2019 was negative 42.8% compared to the benchmark ASX300 index which returned positive 6.8%.

Accordingly, no rights will vest in 2019.

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2. REMUNERATION

2.1. Fees payable to non-executive directors

Fees paid to non-executive directors reflect the demands which are made on, and the responsibilities of, directors.

Directors’ fees are reviewed annually by the board. Directors who chair or are members of a committee do not receive

fees for these services.

The board considers the advice of independent remuneration consultants to ensure directors’ fees are appropriate and

in line with the market. The chairman’s fees are determined independently to the fees of directors and are based on

comparative roles in the market. The chairman is not present at any discussion relating to the determination of his

remuneration. Directors’ fees are determined within an aggregate fee pool limit approved by shareholders. This is

currently set at $400,000 per annum.

The annual fee structure for non-executive directors for the year ended 30 June 2019, including superannuation, was

as follows:

Base fee $ FY19

(1 Feb 19-30 June 19)

$ FY19

(1 July 18 – 31 Jan 19)

$ FY18

Non-Executive Chairman 45,000 75,000 75,000

Non-Executive Directors 36,000 60,000 60,000

The above fees include committee membership. The tables at the end of this remuneration report provide details of

fees paid during the financial year to each non-executive director.

The non-executive directors and chairman fees for FY19 was reduced by 40% effective 1 February 2019, reducing costs

by $0.126M per annum.

2.2. Senior executives

The framework for the remuneration of senior executives consists of a mix of fixed and variable remuneration. The

components are:

Base remuneration package and benefits, inclusive of superannuation (Total Fixed Remuneration)

Short-Term Incentive – based on the Group’s, team and individual performance and results delivered against

pre-determined Key Performance Indicators (KPIs)

Long Term Incentive – governed by the Performance Rights and Options Plan (PROP)

The combination of the above components comprises the executive’s total remuneration.

The Group undertakes a market benchmarking analysis and provide recommendations. The market analysis considers

the target total remuneration opportunity as well as its core components and the mix of those components. In

addition, the information also contains a view on market and emerging trends in executive remuneration structures

and the mix of fixed and performance based remuneration arrangements. The agreed remuneration mix for the CEO

and CFO for the year ended 30 June 2019 was:

Fixed Component STI Bonus

Component

LTI Component

Chief Executive Officer (Ivan Slavich) 69% 25% 6%

Chief Executive Officer (John Huggart) 80% 20% 0%

Chief Operating Office/Chief Financial Officer

(Michael Fahey)

78% 16% 6%

Chief Financial Officer (Tracy Bucciarelli) 85% 15% 0%

Notes 1 Ivan Slavich resigned 21 December 2018

2 John Huggart appointed 1 January 2019

3 Michael Fahey resigned 27 February 2019

4 Tracy Bucciarelli appointed 18 February 2019

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Short-Term Incentive (STI)

The STI is based upon performance against the Group financial performance and results from the Group’s

performance review process. Mid-year and final year performance reviews measure performance against established

KPI’s and criteria which are compiled in a matrix comprising Group and individual components. The specific company

measures include profitability, revenue growth and customer satisfaction. Individual measures are developed having

regard to functional plans and targets, aligned to the company strategy.

The outcome of the performance review process is a rating, applied to each of these three components for an

individual, culminating in a percentage (capped at 125%). The final percentage allocated to each person is then

applied to the STI potential to determine the actual STI payment to be made to an individual.

The performance matrix used to determine actual STI earnings against the STI potential for the CEO and CFO is:

Company Individual

Chief Executive Officer (Ivan Slavich) 70% 30%

Chief Executive Officer (John Huggart) 70% 30%

Chief Operating Officer/Chief Financial Officer

(Michael Fahey)

70% 30%

Chief Financial Officer (Tracy Bucciarelli) 70% 30%





In FY19 the company 70% is made up of Company NPAT 50%, Client NPS 10% and Employee engagement 10%

The Board is responsible for assessing the performance of the CEO. The CEO is responsible for assessing the

performance of other executives.

Bonus payments are made annually, where applicable, in September in relation to the preceding year.

The actual percentage of STI potential and LTI potential earned by the CEO and COO/CFO for the year ended 30 June

2019 was:

% of Bonus

Potential

% LTI Potential

Ivan Slavich 0% 0%

John Huggart 0% 0%

Michael Fahey 0% 0%

Tracy Bucciarelli 0% 0%





The STI potential for each individual is set at the beginning of the year, having regard to service agreement terms and

conditions, and relates to the appropriate extent of the at-risk component of the executive’s remuneration. The

broader company performance criteria ensure that an overall management focus is maintained by the executives,

however the inclusion of individual criteria is also necessary to ensure that each person is recognised and rewarded

for their individual contribution and efforts. Payment of any individual KPI achievement is conditional on the Group

meeting a minimum threshold Operating Profit.

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3. Service agreements

On appointment, all non-executive directors enter into an agreement which outlines obligations and minimum terms

and conditions. Remuneration and other terms of employment for the CEO and other key management personnel are

formalised in employment agreements. Each of these agreements specify the components of remuneration to which

they are entitled and outline base salary, eligibility for incentives and other benefits including superannuation.

Key terms for the CEO and CFO are as follows:

Name Term of agreement Termination*

John Huggart On-going (no fixed term) 3 months base salary termination

by company or 3 months

termination by executive

Tracy Bucciarelli On-going (no fixed term) 3 months base salary termination

by company or 3 months

termination by executive

* Termination benefits are payable at the option of the company in lieu of notice, other than termination for cause.

Remuneration tables

4.1 Remuneration table for the year ended 30 June 2019

Details of remuneration of directors and executive KMP of the Group for the 2019 financial year are set out in the

following table. The executive KMP are considered to be the CEO, COO/CFO and CFO only.

$

Short Term Benefits Post

Employment

Benefits

Long Term Benefits Share Based

Payments

Total

Non-executive

directors

Cash salary

and fees

Cash

bonus

Non-

monetary

benefits

Super Termination

benefits

Long service

leave

Performance

rights

Total

Murray Bleach 57,078 - - 5,422 - - - 62,500

Paul Meehan 45,662 - - 4,338 - - - 50,000

John Mackay 45,662 - - 4,338 - - - 50,000

Nitin Singhi 45,662 - - 4,338 - - - 50,000

Mark de Kock 45,662 - - 4,338 - - - 50,000

Sub-total 239,726 - - 22,774 - - - 262,500

Executives

Ivan Slavich1 210,707 - - 20,716 110,000 - (3,263) 338,160

John Huggart2 300,270 20,531 - 320,801

Michael Fahey3 326,373 - - 21,922 141,032 - (2,446) 486,881

Tracy Bucciarelli4 205,890 19,329 - 225,219

Sub-total 1,043,240 - - 82,498 251,032 - (5,709) 1,371,061

Total 1,282,966 - - 105,272 251,032 - (5,709) 1,633,561





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4.2 Remuneration table for the year ended 30 June 2018

Details of remuneration of directors and KMP of the Group for the 2018 financial year are set out in the following table.

The KMP are considered to be the CEO and COO/CFO only.

$

Short Term Benefits Post-

employment

benefits

Long term benefits Share based

payments

Total

Non-executive

directors

Cash salary

and fees

Cash

bonus

Non-

monetary

benefits

Super Termination

benefits

Long service

leave

Performance

rights

Total

Murray Bleach 68,493 - - 6,507 - - - 75,000

Paul Meehan 54,795 - - 5,205 - - - 60,000

John Mackay 54,795 - - 5,205 - - - 60,000

Nitin Singhi 54,795 - - 5,205 - - - 60,000

Mark de Kock 54,795 - - 5,205 - - - 60,000

Sub-total 287,673 - - 27,327 - - - 315,000

Executives

Ivan Slavich 387,500 - - 20,049 - - 3,263 410,812

Michael Fahey 333,388 - - 20,049 - - 2,446 355,883

Sub-total 720,888 - - 40,098 - - 5,709 766,695

Total 1,008,561 - - 67,425 - - 5,709 1,081,695

Nitin Singhi is a consultant of Horizon Services Trust, which was paid $116,875 in FY19 (FY18 nil). Horizon Services Trust

provided consulting services in relation to the strategic review, the renegotiation of the banking facility and the PAS

repositioning, and introduction of new partners.

Relative Proportion of Remuneration

The relative proportion of remuneration of KMP that was linked to performance and those that were fixed are as follows:

Non-executive

directors

Fixed Remuneration At Risk – Cash Bonus/Other At Risk - Securities

2019

%

2018

%

2019

%

2018

%

2019

%

2018

%

Murray Bleach 100 100 - - N/A N/A

Paul Meehan 100 100 - - N/A N/A

John Mackay 100 100 - - N/A N/A

Nitin Singhi 100 100 - - N/A N/A

Mark de Kock 100 100 - - N/A N/A

Executives

Ivan Slavich^ 69 69 25 25 6 6

John Huggart^^ 100 - - - - -

Michael Fahey^^^ 78 80 16 14 6 6

Tracy Bucciarelli^^^^ 100 - - - - -

Resigned as a Chief Executive Officer effective 21 December 2018

^^ Commenced as Chief Executive Officer effective 1 January 2019

^^^ Resigned as Chief Operating Officer and Chief Financial Officer effective 27 February 2019

^^^^ Commenced as Chief Financial Officer effective 27 February 2019

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Performance rights of key management personnel.

There were NIL Performance Rights for key management personnel as at 30 June 2019 (FY18 422,024 Performance Rights).

Fair value of Performance Rights

The fair value of each Performance Right is estimated on the date the Performance Rights are granted using a Monte Carlo Simulation valuation model.

The following tables outline the movements in Performance Rights balances of Directors and the KMP during the 2019 financial year, and those Performance Rights which have vested at the year-end.

No performance rights were issued to KMP during the 2019 financial year.

Total value of performance rights issued:

30 June 2019 Balance at

1 July 2018 Granted Grant Date

Rights

vested &

transferred

Options

cancelled/

forfeited/

other

Options

expired

without

exercise

Net change Balance at

end of period

$ $ $ $ $ $ $

I. Slavich 112,809 - - (112,809) - (112,809) -

M. Fahey 75,772 - - (75,772) - (75,772) -

Total 188,581 - - (188,581) - (188,581) -

Total number of performance rights issued:

30 June 2019 Balance at

1 July 2018 Granted Grant Date

Rights

vested &

transferred

Options

cancelled/

forfeited/

other

Options

expired

without

exercise

Net change Balance at end

of period

No. No. No. No. No. No. No.

I. Slavich 203,125 - - (203,125) - (203,125) -

M. Fahey 136,830 - - (136,830 - (136,830) -

Total 339,955 - - (339,955) - (339,955) -

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Shareholdings of key

management personnel

30 June 2019

Balance 1 July

2018

Net change

Transfer from

Eplan

KPM resigned

Balance 30 June

2019

Directors

Murray Bleach 1,881,645 819,055 - - 2,700,700

Paul Meehan* 4,792,846 - - - 4,792,846

Nitin Singhi 3,000 - - - 3,000

John Mackay AM ** 58,470 - - - 58,470

Mark de Kock - 50,000 - - 50,000

Executives

Ivan Slavich 329,214 - - (329,214) -

John Huggart - - - - -

Michael Fahey 14,000 - - (14,000) -

Tracy Bucciarelli - - - - -

Total 7,079,175 869,055 - (343,214) 7,605,016

** John Mackay resigned as director effective 30 June 2019

Shareholdings of key

management personnel

30 June 2018

Balance 1 July

2017

Net change

Transfer from

Eplan

KPM resigned

Balance 30 June

2018

Directors

Murray Bleach 1,881,645 - - - 1,881,645

Paul Meehan* 4,798,993 (6,147) - - 4,792,846

Nitin Singhi 3,000 - - - 3,000

John Mackay AM 32,660 25,810 - - 58,470

Mark de Kock - - - - -

Executives

Ivan Slavich 219,214 110,000 - - 329,214

Michael Fahey - - 14,000 - 14,000

Total 6,935,512 129,663 14,000 - 7,079,175

*Corrected as at 30 June 2018

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Transactions with related parties:

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available

to other parties unless otherwise stated. Outstanding balances at year end are unsecured and interest free. No guarantees have

been provided or received.

The following transactions occurred with related parties:

Consolidated Group

2019

$

2018

$

Key Management Personnel

Derwent Executive1 – recruitment services rendered - 22,000

Horizon Services Trust2 – business consulting 116,875 -

Total Key Management Personnel 116,875 22,000

1Related party as Murray Bleach served on the Advisory Board of Derwent Executive (to 18 October 2018) 2Nitin Singhi is a consultant of Horizon Services Trust, which was paid $116,875 in FY19 (FY18 nil). Horizon Services Trust

provided consulting services in relation to the strategic review, the renegotiation of the banking facility and the PAS

repositioning, and introduction of new partners.

4.3 Company Performance

The Group results for the financial year ended 30 June 2019 was a Statutory loss after tax of $12.09 million compared to a

profit of $3.26 million in the prior year.

FY19 FY18

(Restated)

FY17 FY16 FY15

Revenue & other income

($000’s)

24,801 31,767 32,957 33,978 32,049

Net profit / (loss) after tax

($000’s)

(12,093) 3,261 1,773 (449) (2,148)

Operating profit after tax

($000’s)

1,005 3,261 2,521 3,520 2,395

Earnings per share –

Operating

3.87 cents 12.56 cents 9.71 cents 13.56 cents 9.22 cents

Market capitalisation

$10.4m $18.2m $19.5m $30.6m $23.9m

Closing share price

$0.40 $0.70 $0.75 $1.18 $0.92

This director’s report is signed in accordance with a resolution of the Board of Directors.

Murray Bleach

Director

Dated: 28 August 2019

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Financial Statements

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2019

Note Consolidated Group

2019

2018

(Restated)

$ $

Revenue from Contracts with Customers 5 24,631,210 31,656,372

Other income 169,890 110,948

Total Revenue 5.1 24,801,100 31,767,320

Cost of goods and services sold (3,410,880) (4,482,181)

Employee benefits expense 5.2 (12,701,589) (14,266,148)

Rental expense (1,344,865) (1,248,300)

Travel costs (373,527) (313,028)

Administration expenses 5.3 (4,431,606) (4,793,607)

Impairment of goodwill 12 (9,944,796) -

Impairment of software 12 (1,250,000) -

Strategic review (365,634) -

Restructuring costs *** (1,006,523) -

EBITDA* (10,028,320) 6,664,056

Depreciation and amortisation expense 5.4 (914,641) (1,535,080)

One-off Accelerated Depreciation and amortisation expense 5.5 (1,727,389) -

EBIT** (12,670,350) 5,128,976

Financing costs 5.6 (474,553) (530,032)

Profit before income tax (13,144,903) 4,598,944

Income tax expense 6 1,052,018 (1,338,270)

Profit / (loss) for the period attributable to owners of the parent entity

(12,092,885) 3,260,674

Other comprehensive profit / (loss) net of income tax that may be reclassified subsequently to profit and loss

Exchange differences on translation of foreign operations 1,427 (2,373)

Total comprehensive profit / (loss) for the period attributable to owners of the parent entity

(12,091,458) 3,258,301

Gain / (loss) per share: Cents Cents

Basic gain/(loss) per share for the year attributable to ordinary equity holders of the parent

7 (46.59) 12.56

Diluted gain/(loss) per share for the year attributable to ordinary equity holders of the parent

7 (46.59) 12.28

* EBITDA = Earnings before Interest, Tax, Depreciation & Amortisation

** EBIT = Earnings before Interest & Tax

*** Costs associated with restructuring, closure of rental premises and PAS onerous projects

The accompanying notes form part of these financial statements

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Consolidated Statement of Financial Position



2019

2018

(Restated)

$ $

ASSETS

CURRENT ASSETS

Cash and cash equivalents 9 1,608,515 1,171,288

Trade and other receivables 10 3,495,883 3,838,586

Current tax asset 15 74,638 56,738

Other assets 13 4,463,137 5,914,216

TOTAL CURRENT ASSETS 9,642,173 10,980,828

NON-CURRENT ASSETS

Trade and other receivables 10 86,043 91,358

Property, plant and equipment 11 257,283 529,890

Other assets 13 2,935,228 3,289,971

Other Intangible assets 12 3,264,423 3,959,113

Goodwill 12 - 9,944,796

Customer relationships 12 - 1,167,090

TOTAL NON-CURRENT ASSETS 6,542,977 18,982,218

TOTAL ASSETS 16,185,150 29,963,046

CURRENT LIABILITIES

Trade and other payables 14 2,531,845 2,606,507

Short-term provisions 16 1,168,528 1,000,837

TOTAL CURRENT LIABILITIES 3,700,373 3,607,344

NON-CURRENT LIABILITIES

Other long-term provisions 16 234,402 354,256

Loans and Borrowings 17 5,688,471 4,997,225

Deferred tax liability 15 868,145 2,071,216

TOTAL NON-CURRENT LIABILITIES 6,791,018 7,422,697

TOTAL LIABILITIES 10,491,391 11,030,041

NET ASSETS 5,693,759 18,933,005

EQUITY

Issued capital 18b 6,537,906 6,537,906

Share based payments reserve 170,833 318,226

Retained earnings (1,006,800) 12,124,250

Interest rate hedging reserve 18f (9,610) (7,567)

Foreign currency translation reserve 1,430 (39,810)

TOTAL EQUITY 5,693,759 18,933,005

The accompanying notes form part of these f inancial statements

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Consolidated Statement of Changes in Equity


Consolidated Group Note Ordinary

Issued Share Capital

Share Based Payments Reserve

Retained Earnings

Foreign currency

translation reserve

Interest Swap

Reserve Total

$ $ $ $ $ $

Balance at 30 June 2017 (Restated)

6,537,906 262,768 9,226,934 (37,437) (24,165) 15,966,006

Profit/(Loss) attributable to owners of parent entity

- - 3,260,674 - - 3,260,674

Foreign currency translation reserve

18d - - - (2,373)

- (2,373)

Total comprehensive income - - 3,260,674 (2,373) - 3,258,301

Interest rate hedging reserve 18f - - - - 16,598 16,598

Share based payments 18c - 55,458 - -

- 55,458

Dividends paid or provided for 8 - - (363,358) -

- (363,358)


6,537,906 318,226 12,124,250 (39,810) (7,567) 18,933,005


6,537,906 318,226 12,124,250 (39,810) (7,567) 18,933,005

Profit/(Loss) attributable to owners of parent entity

- - (12,092,885) - - (12,092,885)

Foreign currency translation reserve

18d - - - 41,240 - 41,240

Total comprehensive income - - (12,092,885) 41,240 - (12,051,645)

Interest rate hedging reserve 18f - - - - (2,043) (2,043)

Share based payments 18c - (147,393) - - - (147,393)

Dividends paid or provided for 8 - - (1,038,165) - - (1,038,165)

Balance at 30 June 2019 6,537,906 170,833 (1,006,800) 1,430 (9,610) 5,693,759

The accompanying notes form part of these f inanc ial s tatements

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Consolidated Statement of Cash Flow



2019

2018 (Restated)

$ $

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers (inclusive of GST) 29,169,796 36,346,684

Payments to suppliers and employees (inclusive of GST) (25,226,434) (29,311,779)

Restructuring costs (393,728) -

Strategic review (272,360) -

Share based payments share purchase - (142,779)

Interest received 6,974 8,539

Interest paid (412,653) (476,657)

Income tax paid (168,952) (1,150,702)

Net cash (used in) / provided by operating activities 20a 2,702,643 5,273,306

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment 11 (122,760) (177,101)

Software development costs 12 (1,728,212) (1,567,339)

Net cash used in investing activities (1,850,972) (1,744,440)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid by parent entity 8 (1,038,165) (363,358)

Bank loan drawn down/(repayment) 20b 623,721 (4,100,000)

Net cash (used in) / provided by financing activities (414,444) (4,463,358)

Net (decrease)/increase in cash held 437,227 (934,492)

Cash (including restricted cash) at beginning of financial year 9 1,171,288 2,105,780

Cash (including restricted cash) at end of financial year 9 1,608,515 1,171,288

The accompanying notes form part of these financ ial s tatements

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Notes to the Financial Statements for year ended 30 June 2019

Note 1: Corporate Information

The consolidated financial statements and notes represent those of Energy Action Limited and it’s Controlled Entities (the

“consolidated group” or “group” or ‘’EAX’’) for the year ended 30 June 2019. The financial statements were authorised for

issue in accordance with a resolution of the directors on 28 August 2019.

Energy Action Limited (“the Parent”) is a company limited by shares incorporated in Australia whose shares are publicly

traded on the Australian Securities Exchange. The Group is a for profit entity.

The nature of the operation and principal activities of the Group are described in the directors’ report.

Note 2: Summary of Significant Accounting Policies

2.1 Basis of Preparation

The financial statements are general purpose financial statements that have been prepared in accordance with Australian

Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian

Accounting Standards Board (AASB) and the Corporations Act 2001.

Material accounting policies adopted in the preparation of these financial statements are presented below and have been

consistently applied unless otherwise stated.

The financial statements have been prepared on an accruals basis and are based on historical costs, modified, where

applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. The

financial report is presented in Australian dollars. The functional currency is also Australian dollars.

The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

2.2 New Accounting Standards and interpretations

(i) Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year except as follows:

The group has adopted the following Australian Accounting Standards and AASB Interpretations and change in the Company accounting policy as of 1 July 2018:

– AASB 15 Revenue from Contracts with Customers

– AASB 9 Financial Instruments

– Sales Commission Expense

The impact on the Group’s retained earnings as at FY19, FY18 and FY17 was as follows:

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Note 2: Summary of Significant Accounting Policies (Continued)

FY18

Full Year

Jun 18

$

(Restated)

FY17

Full Year

Jun 17

$

(Restated)

Retained earnings, as previously reported - 5,830,890

Retained earnings, restated (B/F) 9,226,934 -

Changes arising from the application of AASB 15

(note a)

593,498 6,392,509

Changes arising from the application of AASB 9

(note b)

- -

Changes in relation to sales commissions expense (note c) 366,955 (1,541,017)

Tax impact of the above (note 15) (288,136) (1,455,448)

NPAT impact 672,317 3,396,044

Profit/(Loss) for the period (as previously reported) 2,588,357 -

Dividend paid (363,358) -

Retained earnings, restated 12,124,250 9,226,934

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The impact on the Group’s financial position as at 30 June 2018 was as follows:

Consolidated Group

30 Jun 2018

(As reported)

$

$

AASB 15

Adjustment

(Note a)

$

AASB 9

Adjustment

(Note b)

$

Sales

Commission

Expense

(Note c)

$

30 Jun 2018

(Restated)

$

CURRENT ASSETS

Cash and cash equivalents 1,171,288 - - - 1,171,288

Trade and other receivables 3,838,586 - - - 3,838,586

Current tax asset 56,738 - - - 56,738

Other assets 2,374,044 4,111,610 - (571,438) 5,914,216

TOTAL CURRENT ASSETS 7,440,656 4,111,610 - (571,438) 10,980,828

NON-CURRENT ASSETS

Trade and other receivables 91,358 - - - 91,358

Property, plant and equipment 529,890 - - - 529,890

Other assets 339,389 3,289,971 - (339,389) 3,289,971

Software Development 3,959,113 - - - 3,959,113

Goodwill 9,944,796 - - - 9,944,796

Customer relationships 1,167,090 - - - 1,167,090

TOTAL NON-CURRENT ASSETS 16,031,636 3,289,971 - (339,389) 18,982,218

TOTAL ASSETS 23,472,292 7,401,581 - (910,827) 29,963,046

CURRENT LIABILITIES

Trade and other payables 1,927,698 - - 678,809 2,606,507

Short Term provisions 1,000,837 - - - 1,000,837

TOTAL CURRENT LIABILITIES 2,928,535 - - 678,809 3,607,344


Other long term provisions 354,256 - - - 354,256

Loans and Borrowings 4,997,225 - - - 4,997,225

Deferred tax liabilities 327,632 2,220,474 - (476,890) 2,071,216

TOTAL NON-CURRENT LIABILITIES 5,679,113 2,220,474 - (476,890) 7,422,697

TOTAL LIABILITIES 8,607,648 2,220,474 - 201,919 11,030,041

NET ASSETS 14,864,644 5,181,107 - (1,112,746) 18,933,005

EQUITY

Issued capital 6,537,906 - - - 6,537,906

Share based payments reserve 318,226 - - - 318,226

Retained earnings 8,055,889 5,181,107 - (1,112,746) 12,124,250

Interest Swap Reserve (7,567) - - - (7,567)

Foreign currency translation reserve (39,810) - - - (39,810)

TOTAL EQUITY 14,864,644 5,181,107 - (1,112,746) 18,933,005

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The impact on the Group’s financial position as at 30 June 2017 was as follows:

Consolidated Group

30 Jun 2017

(As reported)

$

$

AASB 15

Adjustment

(Note a)

$

AASB 9

Adjustment

(Note b)

$

Sales

Commission

Expense

(Note c)

$

30 Jun 2017

(Restated)

$

CURRENT ASSETS

Cash and cash equivalents 2,105,780 - - - 2,105,780

Trade and other receivables 5,992,413 - - - 5,992,413

Current tax asset 877 - - - 877

Other assets 2,221,521 3,736,987 - (815,396) 5,143,112

TOTAL CURRENT ASSETS 10,320,591 3,736,987 - (815,396) 13,242,182

NON-CURRENT ASSETS

Trade and other receivables 91,358 - - - 91,358

Property, plant and equipment 744,273 - - - 744,273

Other assets 549,478 2,655,520 - (594,004) 2,610,995

Software Development 3,312,004 - 3,312,004

Goodwill 9,944,796 - 9,944,796

Customer relationships 1,406,174 - 1,406,174

TOTAL NON-CURRENT ASSETS 16,048,083 2,655,520 - (594,004) 18,109,600

TOTAL ASSETS 26,368,674 6,392,508 - (1,409,400) 31,351,782

CURRENT LIABILITIES

Trade and other payables 2,717,042 - - 131,617 2,848,659

Short Term provisions 1,374,146 - - 1,374,146

TOTAL CURRENT LIABILITIES 4,091,188 - - 131,617 4,222,805


Other long term provisions 320,180 - - - 320,180

Loans and Borrowings 9,015,005 - - - 9,015,005

Deferred tax liabilities 372,339 1,917,752 - (462,305) 1,827,786

TOTAL NON-CURRENT LIABILITIES 9,707,524 1,917,752 - (462,305) 11,162,971

TOTAL LIABILITIES 13,798,712 1,917,752 - (330,688) 15,385,776

NET ASSETS 12,569,962 4,474,756 - (1,078,712) 15,966,005

EQUITY

Issued capital 6,537,906 - - - 6,537,906

Share based payments reserve 262,768 - - - 262,768

Retained earnings 5,830,890 4,474,755 - (1,078,712) 9,226,934


Foreign currency translation reserve (37,437) - - - (37,437)

TOTAL EQUITY 12,569,962 4,474,755 - (1,078,712) 15,966,006

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The impact on the Group’s comprehensive income as at 30 June 2018 was as follows:

Consolidated Group

FY18

(As reported)

$

AASB 15

Adjustment

(Note a)

$

AASB 9

Adjustment

(Note b)

$

Sales

Commission

Expense

(Note c)

$

FY18

(Restated)

$

Continuing operations

Revenue 31,062,876 593,496 - - 31,656,372

Other income 110,948 - - - 110,948

Total Revenue 31,173,824 593,496 - - 31,767,320

Cost of goods and services sold (4,466,526) - - (15,655) (4,482,181)

Employee benefits expense (14,648,760) - - 382,612 (14,266,148)

Rental expense (1,248,300) - - - (1,248,300)

Travel expenses (313,028) - - - (313,028)

Administration expenses (4,793,607) - - - (4,793,607)

EBITDA 5,703,603 593,496 - 366,957 6,664,056

Depreciation and amortisation (1,535,080) - - - (1,535,080)

EBIT 4,168,523 593,496 - 366,957 5,128,976

Financing costs (530,032) - - - (530,032)

Profit / (Loss) before income tax 3,638,491 593,496 - 366,957 4,598,944

Income tax expense (1,050,134) (178,049) - (110,087) (1,338,270)

Profit / (Loss) for the year attributable to

members of the parent entity 2,588,357 415,447 -

256,870 3,260,674

Other comprehensive income/(loss) for the

period, net of tax, that may be reclassified

subsequently to profit or loss:

Exchange differences on translation of foreign

operations

- - - - -


Total comprehensive income for the year

attributable to members of the parent entity 2,585,984 415,447 -

256,870 3,258,301

Earnings per share:

Cents

Basic earnings per share for the year attributable

to ordinary equity holders of the parent 9.97 - - - 12.56

Diluted earnings per share for the year

attributable to ordinary equity holders of the

parent 9.95 - - - 12.53

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(a) AASB 15 Revenue from Contracts with Customers

AASB 15 introduced revised guidance which will require revenue from certain procurement activities to be recognised in

the period in which the procurement activity is undertaken.

Energy Action reviewed its accounting policy in light of this guidance and performed analysis on each revenue line item. It

was determined that procurement revenue relating to Auction and Commission Based Tenders previously recognised over

the term of the underlying energy contract will be recognised on finalisation of the related energy procurement contract.

Accordingly, revenue will be recognised upfront once the Auction is complete and contracts signed between the retailer

and the customer. Upon completion of the Auction, the amount recognised as contract assets are reclassified to trade

receivables. The commercial and payment terms of the contract term remain unchanged with payments being received

over the life of the contract. Accordingly, a contract asset called “Revenue not invoiced” has been created to recognise the

difference between revenue recognised and the amount invoiced.

Energy Action has historically experienced cancellation of Auction revenue during the contract period of approximately

7.3% based on the last 2 years of history. Accordingly it was assessed that 7.3% of the total values of contracts entered into

should be provided for on the balance sheet as a provision for cancellations on an ongoing basis. This has the effect of

reducing revenue and providing for the risk of cancellation, for the period between recognising revenue and invoicing the

retailer.

Energy Action has adopted the full retrospective approach to implement the standard since it allows for comparison of FY19

results to FY18 results on a like for like basis. This will result in a one-off acceleration of revenue. Management has

completed a full assessment by reviewing all contracts/arrangements. The finding indicates that the adoption of the new

revenue accounting policies resulted in an adjustment of $593,498 before tax in Jun 18 and $6,392,509 before tax in Jun

17.

As a practical expedient, Energy Action recognise the incremental costs of obtaining a contract as an expense when

incurred. From 1 July 2018 management has expensed sales representative and agents’ commissions upfront in line with

the revenue also being recognised upfront.

Other Procurement and Monitoring revenue, Project and Advisory Services (PAS) revenue is recognised in the accounting

period in which services are rendered and/or in accordance with the percentage of completion of the project.

(b) AASB 9 Financial Instruments

AASB 9 replaces the provisions of AASB 139 in relation to financial instruments and hedge accounting.

The key change to Energy Action’s financial report arising from this standard is in relation to the impairment of financial

assets (mainly receivables). AASB 9 effectively moves from an “incurred losses” model to an “expected losses” model, which

requires a forward-looking assessment of potential default events and losses over the life of these assets.

Energy Action evaluated the aged debtors trial balance on a monthly basis. An allowance for expected credit loss has been

calculated based on the forward-looking loss rates established for direct customers. Accounts with administrator appointed

or in liquidation will be fully provided for except where a reasonable estimate can be made of the recoverable amount. Nil

provision for retailers and metering companies based on history and due to minimal risk.

The adoption of AASB 9 did not have any material impact on the financial position or performance of the group.

(c) Sales Commissions Expense

In conjunction with the change in revenue recognition for auctions, management has also changed the current policy in

relation to sales commissions expense. The sales commissions expense relates to sales representatives and external agents

who are paid commission on sales contracts, predominately Auction and Metrics related. Historically sales representatives

commissions are paid upfront, held in the balance sheet as an asset and amortised over a period of time in line with the

average length of the contracts. This company policy change results in the adjustment of $366,955 before tax in Jun 18 and

($1,541,017) before tax in Jun 17.

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(ii) Accounting Standards and Interpretations issued but not yet effective

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective and have not been adopted by the Group for the annual reporting period ending 30 June 2019 are outlined in the table below:

Standard/Interpretation Effective for the annual reporting period beginning on

Expected to be initially applied in the financial year ending

AASB 16 Leases January 1, 2019 June 30, 2020 IFRIC 23 Uncertaininty over Income Tax Treatments (Australian equivalent interpretation not yet issued)

January 1, 2019 June 30, 2020

AASB 17 Insurance Contracts January 1, 2019 June 30, 2020 AASB Interpretation 23 Uncertainty over Income Tax Treatment January 1, 2019 June 30, 2020 AASB 2017-6 Amendments to Australian Accounting Standards – Prepayment Features with Negative Compensation

January 1, 2019 June 30, 2020

AASB 2018-2 Amendments to Australian Accounting Standards – Plan Amendment, Curtailment or Settlement

January 1, 2019 June 30, 2020

AASB 2017-7 Amendments to Australian Accounting Standards – Prepayment Features with Negative Compensation

January 1, 2019 June 30,2020

AASB 2018-1 Amendments to Australian Accounting Standards – Annual Improvements 2015-2017 Cycle - AASB 3 Business Combinations - AASB 11 Joint Arrangements - AASB 112 Income Taxes - AASB 123 Borrowing Costs

January 1, 2019 June 30, 2020

With the exception of those noted below, the Directors have not yet assessed whether the above amendments and interpretations will have a material impact on the financial report of the Group in the year or period of initial application.

Impact of AASB 16 on future reporting periods:

Adoption of AASB 16, effective 1 January 2019, AASB 16 set out the principles for the recognition, measurement, presentation and disclosure of leases. The new standard requires leasing contracts to be recognised on the balance sheet. A distinction is no longer made between operating leases and finance leases. The directors expect this will result in an increase in assets and liabilities, as well as a decrease in operating expenses (net of significant items) and an increase in financial expenses.

The adoption of AASB 16 is likely to have a material impact on the financial position of the Group.

2.3

a.

Key Accounting Policies

Principles of Consolidation

The consolidated financial statements are comprised of the financial statements of the Group and its subsidiaries

as at 30 June 2019. Control is achieved when the Group is exposed, or has rights, to variable returns from its

involvement with the investee and has the ability to affect those returns through its power over the investee.

Specifically, the Group controls an investee if and only if the Group has:

Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities

of the investee)

Exposure, or rights, to variable returns from its involvement with the investee, and

The ability to use its power over the investee to affect its returns

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Generally, there is a presumption that a majority of voting rights results in control. To support this presumption

and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all

relevant facts and circumstances in assessing whether it has power over an investee, including:

The contractual arrangement(s) with the other vote holders of the investee

Rights arising from other contractual arrangements

The Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are

changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group

obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities,

income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated

statement of comprehensive income from the date the Group gains control until the date the Group ceases to

control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the

parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having

a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their

accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity,

income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on

consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity

transaction. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill),

liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in

profit or loss. Any investment retained is recognised at fair value.

b. Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as

the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of

any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure

the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s

identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate

classification and designation in accordance with the contractual terms, economic circumstances and pertinent

conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the

acquiree.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition

date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted

for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within

the scope of AASB 9 Financial Instruments, is measured at fair value with the changes in fair value recognised in

the statement of profit or loss in accordance with IFRS 9. Other contingent consideration that is not within the

scope of AASB 9 is measured at fair value at each reporting date with changes in fair value recognised in profit or

loss.

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c. Goodwill

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the

amount recognised for non-controlling interests and any previous interest held over the net identifiable assets

acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate

consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and

all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the

acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the

aggregate consideration transferred, then the gain is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of

impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of

the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether

other assets or liabilities of the acquiree are assigned to those units.

Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is

disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the

operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured

based on the relative values of the disposed operation and the portion of the cash-generating unit retained.

d. Income Tax and other taxes

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the

taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or

substantively enacted at the reporting date in the countries where the Group operates and generates taxable

income.

Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement

of profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in

which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and

liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a

transaction that is not a business combination and, at the time of the transaction, affects neither the

accounting profit nor taxable profit or loss

In respect of taxable temporary differences associated with investments in subsidiaries, associates and

interests in joint arrangements, when the timing of the reversal of the temporary differences can be

controlled and it is probable that the temporary differences will not reverse in the foreseeable future

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits

and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit

will be available against which the deductible temporary differences, and the carry forward of unused tax credits

and unused tax losses can be utilised, except:

When the deferred tax asset relating to the deductible temporary difference arises from the initial

recognition of an asset or liability in a transaction that is not a business combination and, at the time of

the transaction, affects neither the accounting profit nor taxable profit or loss

In respect of deductible temporary differences associated with investments in subsidiaries, associates

and interests in joint arrangements, deferred tax assets are recognised only to the extent that it is

probable that the temporary differences will reverse in the foreseeable future and taxable profit will be

available against which the temporary differences can be utilised

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is

no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be

utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent

that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

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Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the

asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively

enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax

items are recognised in correlation to the underlying transaction either in OCI or directly in equity.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at

that date, are recognised subsequently if new information about facts and circumstances change. The adjustment

is either treated as a reduction in goodwill (as long as it does not exceed goodwill) if it reflects new information

obtained about facts and circumstances that exist at the acquisition date that, if known, would have affected the

amount recognised at that date where recognised during the measurement period or recognised in profit or loss.

The Group offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to

set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to

income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities

which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the

liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are

expected to be settled or recovered.

Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

When the GST incurred on a sale or purchase of assets or services in not payable to or recoverable from

the taxation authority, in which case the GST is recognised as part of the revenue or the expense item or

as part of the cost of acquisition of the asset, as applicable

When receivables and payables are stated with the amount of GST included

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or

payables in the statement of financial position. Commitments and contingencies are disclosed net of the amount

of GST recoverable from, or payable to, the taxation authority.

Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows

arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is

classified as part of operating cash flows.

e. Plant and Equipment

Each class of plant and equipment is carried at cost or fair value as indicated less, where applicable, any

accumulated depreciation and impairment losses.

Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation

and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the

estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable

amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment

losses relate to a re-valued asset.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the

recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash

flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows

have been discounted to their present values in determining recoverable amounts.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,

only when it is probable that future economic benefits associated with the item will flow to the Group and the cost

of the item can be measured reliably. All other repairs and maintenance are charged to the statement of

comprehensive income during the financial period in which they are incurred.

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Depreciation

The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold

land, is depreciated on a straight-line basis over the asset’s useful life to the consolidated group commencing from

the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the

unexpired period of the lease or the estimated useful lives of the improvements

The depreciation rates used for each class of depreciable assets are

Class of Fixed Asset Depreciation Rate

Computer equipment 25% - 33.3%

Furniture and fittings 20%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting

period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is

greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and

losses are included in the statement of comprehensive income. When re-valued assets are sold, amounts included

in the revaluation surplus relating to that asset are transferred to retained earnings.

f. Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not

the legal ownership that is transferred to entities in the consolidated group, are classified as finance leases.

Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair

value of the leased property or the present value of the minimum lease payments, including any guaranteed

residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest

expense for the period.

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease

term.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are

recognised as expenses in the periods in which they are incurred. Lease incentives under operating leases are

recognised as a liability and amortised on a straight-line basis over the lease term. Estimated remediation costs at

the conclusion of a lease are accrued on a straight-line basis over the lease term.

g. Financial Instruments

Financial assets – initial recognition and subsequent measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through

other comprehensive income (OCI), and fair value through profit or loss.

The Group recognises an allowance for expected credit losses (ECLs) for all receivables and contract assets. ECLs

are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk

since initial recognition, ECLs are provided for credit losses that result from default events that are possible within

the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in

credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of

the exposure, irrespective of the timing of the default (a lifetime ECL).

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For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore,

the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at

each reporting date. The Group has established a provision matrix that is based on its historical credit loss

experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

The Group adopted AASB 9 effectively moves from an “incurred losses” model to an “expected losses” model,

which requires a forward-looking assessment of potential default events and losses over the life of these assets.

The Group’s trade receivables do not contain a significant financing component, lifetime expected credit losses can

be recognised right on initial recognition. The Group elected to use the simplification method, hence a provision

matrix can be used.

The Group’s trade and other receivables are exposed to credit risk with ageing analysis and impairment provided

for thereon. Amounts are considered as ”past due” when the debt has not been settled, with the terms and

conditions agreed between the Group and the customer or counterparty to the transaction. Receivables that are

past due are assessed for impairment by ascertaining solvency of the debtors and are provided for where there are

specific circumstances indicating that the debt may not be fully repaid to the Group.

Financial Liabilities - Loans and borrowings

This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are

subsequently measured at amortised cost using the Effective Interest Rate method. Gains and losses are

recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that

are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.

h.

Impairment of Non-financial Assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any

indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s

recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair

value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset,

unless the asset does not generate cash inflows that are largely independent of those from other assets or groups

of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered

impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time value of money and the risks specific to the

asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such

transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by

valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared

separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast

calculations generally cover a period of five years. Long-term growth rate is calculated and applied to project future

cash flows after the fifth year.

Impairment losses of continuing operations, are recognised in the statement of profit or loss in expense categories

consistent with the function of the impaired asset, except for properties previously revalued with the revaluation

taken to Other Comprehensive Income (OCI). For such properties, the impairment is recognised in OCI up to the

amount of any previous revaluation.

For assets excluding goodwill and intangibles with indefinite useful life, an assessment is made at each reporting

date to determine whether there is an indication that previously recognised impairment losses may no longer exist

or may have decreased. If such indication exists, the Group estimates the assets or CGUs recoverable amount.

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Note 2: Summary Of Significant Accounting Policies (Continued)

A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to

determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so

that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount

that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in

prior years. Such reversal is recognised in the statement of profit or loss unless the asset is carried at a revalued

amount, in which case, the reversal is treated as a revaluation increase.

The following assets have specific characteristics for impairment testing:

Goodwill

Goodwill is tested for impairment annually (as at 30 June) and when circumstances indicate that the carrying value

may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or

group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying

amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future

periods.

Intangible assets

Intangible assets with indefinite useful lives are tested for impairment annually as at 30 June at the CGU level, as

appropriate, and when circumstances indicate that the carrying value may be impaired. Intangible assets with finite

lives are amortised over the useful life and assessed for impairment whenever there is an indication that the

intangible asset may be impaired. The amortisation period and the amortisation method for any intangible asset

with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful life or the

expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing

the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation

expense on intangible assets with finite lives is recognised in the Statement of Comprehensive Income in the

expense category consistent with the function of the intangible asset.

i. Intangible assets other than Goodwill

Software, research and development costs

Research costs are expensed as incurred. Development expenditures including website development costs on an

individual project are recognised as an intangible asset when the Group can demonstrate:

The technical feasibility of completing the intangible asset so that it will be available for use or sale Its intention to complete and its ability to use or sell the asset How the asset will generate future economic benefits The availability of resources to complete the asset The ability to measure reliably the expenditure during development

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any

accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is

available for use. It is amortised over the period of expected future benefit. Amortisation is expensed through the

profit and loss. During the period of development, the asset is tested for impairment annually.

The useful life of development costs is finite. It is amortised on a straight line basis over its expected useful life. The

development costs are internally developed. The amortisation rates are as follows:

Software development costs 20%

Customer relationships

The useful life of customer relationships is finite. It is amortised on a straight line basis over its expected useful life,

which is between six and twelve years.

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j. Employee Benefits

Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to the

end of the reporting period. Employee benefits that are expected to be settled within one year have been

measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than

one year have been measured at the present value of the estimated future cash outflows to be made for those

benefits. In determining the liability, consideration is given to employee wages increases and the probability that

the employee may satisfy vesting requirements. Those cash flows are discounted using market yields on high

quality corporate bonds with terms to maturity that match the expected timing of cash flows.

k. Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for

which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the

reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The

expense relating to any provision is present in the income statement net of any reimbursement. Provisions are

measured using the best estimate of the amounts required to settle the obligation at the end of the reporting

period.

Onerous contracts An onerous contract is considered to exist where the company has a contract under which the unavoidable cost of meeting the contractual obligations exceed the economic benefits estimated to be received. Present obligations arising under onerous contracts are recognised as a provision to the extent that the present obligation exceeds the economic benefits estimated to be received. Restructuring

A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring

and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement

the plan or announcing its main features to those affected by it. Future operating losses are not provided for.

l. Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits available on demand with banks, other short-term highly

liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are

reported within short-term borrowings in current liabilities in the statement of financial position.

m. Revenue and Other Income

The Group is in the business of providing procurement activity, contract management and environmental

reporting, embedded networks and advisory services. Revenue from contracts with customers is recognised when

controls of the services are transferred to the customer at an amount that reflects the consideration to which the

Group expects to be entitled in exchange for those services.

Revenue from Auction and Commission based tenders are recognised upfront once the Auction is complete and

contracts signed between the retailer and the customer. The commercial and payment terms of the contract term

remain unchanged with payments being received over the life of the contract. Accordingly, a contract asset called

“Revenue not invoiced” has been created to recognise the difference between revenue recognised and the amount

invoiced.

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Auction contracts provide a customer with a right to cancel during the contract period. The Group estimates cancellation of Auction revenue during the contract period of approximately 7.3% based on the last 2 years of history. Accordingly it was assessed that 7.3% of the total values of contracts entered into should be provided for on the balance sheet as a provision for cancellations on an ongoing basis. This has the effect of reducing revenue and providing for the risk of cancellation, for the period between recognising revenue and invoicing the retailer.

Other Procurement and Monitoring revenue, Project and Advisory Services (PAS) revenue is recognised in the

accounting period in which services are rendered and/or in accordance with the percentage of completion of the

project. (Revenue is transferred over time)

The sales commission paid to sales representatives and external agent will be expensed up front in line with the

revenue also being recognised upfront.

n. Foreign Currency Transaction

The Group’s consolidated financial statements are presented in Australian dollars, which is also the Parent’s

functional currency. For each entity the Group determines the functional currency and items included in the

financial statements of each entity are measured using that functional currency. The Group uses the direct method

of consolidation and has elected to recycle the gain or loss that arises from using this method.

i) Transactions and balances

Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional

currency spot rates at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot

rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are

recognised in profit or loss with the exception of monetary items that are designated as part of the hedge of the

Group’s net investment of a foreign operation. These are recognised in other comprehensive income until the net

investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and

credits attributable to exchange differences on those monetary items are also recorded in other comprehensive

income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the

exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign

currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss

arising on translation of non-monetary items measured at fair value is treated in line with the recognition of gain or

loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is

recognised in other comprehensive income or profit or loss are also recognised in other comprehensive income or

profit or loss, respectively).

In determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part

of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the

date of the transaction is the date on which the Group initially recognises the non-monetary asset or non-monetary

liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Group

determines the transaction date for each payment or receipt of advance consideration.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying

amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign

operation and translated at the spot rate of exchange at the reporting date

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ii) Group companies

On consolidation, the assets and liabilities of foreign operations are translated into dollars at the rate of exchange

prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at

the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in

other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income

relating to that particular foreign operation is recognised in profit or loss.

o.

Work-in-progress

When the outcome of a contract can be estimated reliably, contract revenue and contract costs are recognised as

revenue and expenses respectively by reference to the stage of completion of the contract activity at the balance

sheet date. When the outcome of a contract cannot be estimated reliably, contract revenue is recognised to the

extent of contract costs incurred that are likely to be recoverable. When it is probable that total contract costs will

exceed total contract revenue, the expected loss is recognised as an expense immediately.

At the end of each accounting period the long term contracts percentage completion is assessed individually and

any unbilled percentage completion is recognised as work in progress income for the period.

p. Share based payments

The Group provides benefits to employees in the form of equity settled share based payments, whereby employees

render services in exchange for shares or rights over shares. The fair value of rights granted to eligible employees

under the Energy Action Performance Rights & Options Plan (PROP) is recognised as an employee benefits expense,

with a corresponding increase in the employee equity benefits reserve. The fair value is measured at grant date

and recognised over the period in which the employee becomes entitled to the PROP grant. The fair value at grant

date is determined by an independent valuer. Details of the fair value of share based payment plans are set out in

Note 18.

At the end of each reporting period, the Group revises its estimate of the numbers of rights expected to vest. The

amount recognised as an expense is only adjusted when the rights do no vest due to non-market related

conditions.

q. Interest Rate Hedging

The Group uses derivative financial instruments, such as interest rate swaps to hedge its interest rate risks. Such

derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is

entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair

value is positive and as financial liabilities when the fair value is negative.

At the inception of the hedge relationship, the Group formally designates and documents the hedge relationship to

which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the

hedge. The documentation includes identification of the hedging instrument, the hedge item, the nature of the risk

being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in

offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk.

To protect against adverse interest rate movement, the Group has entered into an interest rate swap transaction

for up to a maximum of $5 million to fix at an effective interest rate of 3.38% (inclusive of margin) on the first $5

million for the balance of the Multi-Option Facility Agreement ending 1 October 2019.

At the end of each reporting period, the Group assesses the hedge effectiveness between hedged item and hedging

instrument to determine whether the risk management objective for the hedging relationship has changed.

The estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are

recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of

the revision and future periods if the revision affects both current and future periods.

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Note 3: Significant Accounting Judgements, Estimates and Assumptions

Impairment of goodwill and other intangible assets

The Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to

the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed

using value-in-use calculations which incorporate various key assumptions.

Share-based payment transactions

The Group measures the cost of equity-settled transactions with suppliers with reference to the fair value of the

equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions

requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the

grant. This estimate also requires determining the most appropriate inputs to the valuation model including the

expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions

and models used for estimating fair value for share-based payment transactions are disclosed in Note 19.

Development costs

Development costs are capitalised in accordance with the accounting policy in Note 2(i). Initial capitalisation of costs

is based on management’s judgement that technological and economic feasibility is confirmed, usually when a

product development project has reached a defined milestone according to an established project management

model. In determining the amounts to be capitalised, management makes assumptions regarding the expected future

cash generation of the project, discount rates to be applied and the expected period of benefits. This includes

significant investments in the development of software. The software is being enhanced and /or developed for use

within the business, improving operational efficiency.

Onerous Contracts

Energy Action’s policy for onerous contracts is stated in Note 2(k). The application of this policy requires management

to make certain estimates and assumptions as to future events and circumstances in relation to costs to meet

contractual obligations.

Employee benefits

Employee benefits are predominantly annual leave and long service leave. In determining these provisions,

management makes assumptions in regards to future wage increases, and the probability that employees may satisfy

vesting requirements for long service leave.

Work in progress

Energy Action performs services under contracts that last longer than one reporting period. For these contracts,

revenue and costs are recognised on a percentage of completion basis. Percentage of completion by project is

estimated by the project relevant project manager based on their assessment of completion versus milestones.

Revenue not invoiced and Provision for Cancellation

The Group adopted the full retrospective approach to implement AASB 15 Revenue from Contracts with Customers.

The revenue will be recognised upfront once the auction is complete and contracts signed between the retailer and

the customer. An asset “Revenue not invoice” has been created to recognise the difference between revenue

recognised and the amount invoiced. The total value of contracts entered into historically experienced cancellation of

auction revenue during the contract period. A provision for cancellations of 7.3% has been provided to reduce the risk

of cancellation. The assessment of historical cancellations is reviewed at each reporting period and revised

accordingly. As at 30 June 2019, holds a provision for 6.7% of the total value of revenue not invoiced.

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Note 4: Segment information

Identification of reportable segments

The Group has identified one reportable operating segment, which provides electricity and gas procurement services, Contract Management & Environmental Reporting (CMER) services, and sustainability services in Australia. The types of services provided are detailed below.

Types of Services

Energy Action’s principal activities are providing integrated energy management services to a diverse base of commercial and industrial customers. Its core services are:

Energy procurement: specialised buying and negotiation strategies, utilising reverse auctions, bespoke tender models and advising on structured products;

CMER: manage client energy contracts, including account management, liaison with their retailer, validating their bill, ensuring the right tariff and helping them to understand how they are using energy; and,

Energy efficiency and sustainability; Projects and Advisory Services (PAS).

The Australian Energy Exchange (AEX) electricity and gas procurement service is an online, real time and reverse auction platform for business customers which provides the opportunity to competitively obtain energy supply contracts from various energy providers.

Energy Metrics is an independent CMER platform which transforms energy data into usable business intelligence that is easy to understand and essential for improving overall business efficiency.

The types of CMER services include energy consumption monitoring and costing, energy emissions monitoring, contract administration, detailed technical reporting, desktop energy efficiency review and additional reporting and monitoring.

Advisory Services (AS) will focus on optimizing energy efficiency for commercial buildings, as well as environmental reporting and NABERS rating services for property portfolio clients. The Group will also continue to engage in embedded networks implementation. All activity relating to head contracting on projects, project management, independent commissioning agent and engineering contracts (including upgrades), which often were underperforming areas of the former PAS division, will cease. The Group expects to complete a majority of the current order book related to these activities by 30 June 2019 and will be referring any outstanding work to partners.

In the table below revenue is analysed by service line, however overall the performance of the business is monitored as one.

Accounting Policies and inter-segment transaction

The accounting policies used by the Group in the reporting segment internally are the same as those contained in Note 2 to the accounts.

Revenue by customer

There is no revenue with a single external customer that contributes more than 10% of total revenue.

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Note 5: Revenue, Other Income and Expenses

Year-ended 30 June 2019

Procurement Monitoring Project

Advisory

Services

Total

$ $ $ $

Revenue from contracts with customers

6,419,299 13,995,134 4,216,777 24,631,210

Other income 169,890 - - 169,890

6,589,189 13,995,134 4,216,777 24,801,100

Year-ended 30 June 2018

(Restated)

Procurement Monitoring Project

Advisory Services

Total

$ $ $ $

Revenue from contracts with customers

9,872,786 15,145,890 6,637,696 31,656,372

Other income 110,948 - - 110,948

9,983,734 15,145,890 6,637,696 31,767,320

5.1 Consolidated Group

Timing of Revenue Recognition 2019

2018 (Restated)

$ $

Services transferred at a point in time 5,129,626 8,040,802

Services transferred over time 19,671,474 23,726,518

Total Revenue from contracts with customers 24,801,100 31,767,320

All material revenues are generated in Australia.

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Note 5: Revenue, Other Income and Expenses (continued)


2019 2018

(Restated)

$ $

5.2

Employee benefits

Salaries 10,501,458 11,332,295

Commissions 223,376 445,165

Superannuation 1,098,749 1,275,709

Share based payment expense (93,759) 82,457

Other 971,765 1,130,522

Total Employment benefits 12,701,589 14,266,148

5.3

Administrative costs

Accounting, audit and tax fees 225,049 198,235

Advertising 253,496 470,536

Legal and professional fees 125,606 92,804

Telephone and internet 99,677 204,219

Computer maintenance costs 1,992,418 1,763,038

Bad debt expense * (12,302) 100,768

Recruitment costs 118,579 112,989

Other expenses 1,629,083 1,851,018

Total Administrative costs 4,431,606 4,793,607

5.4

Depreciation and amortisation

Depreciation 238,409 375,767

Amortisation - Software 676,232 920,230

Amortisation - Customer relationships - 239.083

Total Depreciation & amortisation 914,641 1,535,080

5.5

One-off Accelerated Depreciation and Amortisation

Accelerated Amortisation – Customer relationship 1,167,090 -

Accelerated Amortisation – Software 496,671 -

Accelerated Depreciation – Furniture and fitting 63,628 -

Total One-off Accelerated Depreciation and Amortisation 1,727,389 -

5.6

Financing costs / (income)

Interest income (6,960) (8,539)

Interest expenses 372,192 452,070

Borrowing costs 109,321 86,501

Total Financing costs / (income) 474,553 530,032

*Bad debt exp included provision adjustment ($12,302), (FY18: actual bad debt write-off $37,349 net of provision adjustment $63,419)

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Note 6: Income Tax Expense


2019

2018 (Restated)

$ $

a. The components of tax expense comprise:

Current tax 115,183 1,151,405

Current tax – under/(over) prior year (7,224) (56,564)

Tax rate change (169,010) -

Deferred tax 15 (990,967) 243,430

(1,052,018) 1,338,270

b. The prima facie tax on profit from ordinary activities before income tax is reconciled to the income tax as follows:

Prima facie tax (benefit) / payable on profit / (loss) from ordinary activities before income tax at 27.5% (2018: 30.0%)

(3,614,849)

1,379,683

Add Tax effect of :

Permanent Differences

— Tax rate change (169,010) -

— Share based payments/trust (12,128) (15,400)

— Goodwill impairment 2,734,819 -

— Other permanent differences 16,374 25,557

— Prior year adjustments (7,224) (56,564)

Less Tax effect of :

Deductible Expense

— Unbooked tax losses - 4,994

Income tax attributable to entity (1,052,018) 1,338,270

The applicable weighted average effective tax rates are as follows:

8.00% 29.10%

Energy Action Limited and its 100% owned subsidiaries formed a tax consolidated group with effect from 3 March 2009. Energy Action Limited is the head entity of the tax consolidated group.

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Note 7: Earnings per Share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders

of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the

parent (after adjusting for interest on the convertible preference shares) by the weighted average number of ordinary

shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on

conversion of all dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic diluted earnings per share computations:

2019

2018 (Restated)

$ $

Net profit / (loss) attributable to ordinary equity holders of the parent from continuing operations

(12,092,885) 3,260,673

Net profit / (loss) attributable to ordinary equity holders of the parent for basic earnings

(12,092,885) 3,260,673

Net profit / (loss) attributable to ordinary equity holders of the parent adjusted for the effect of dilutions

(12,092,885) 3,260,673

2019 No.

2018 No.

Weighted average number of ordinary shares for basic earnings per share

25,954,117 25,954,117

Effect of dilution:

Performance rights - 600,838

Weighted average number of ordinary shares adjusted for the effect of dilution

25,954,117 26,554,955

Basic earnings / (loss) per share (Statutory) (46.59) 12.56

Diluted Earnings / (loss) per share (Statutory) (46.59) 12.28

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date

and the date of completion of these financial statements.

Under the accounting standards, losses are not diluted. The dilution calculation has been performed to enable users of these financial statements to determine the impact of the dilution on both Statutory and Operating Profit per share. Effect of dilution: Performance rights 33,334 (FY18: 600,838). Refer also to the Directors’ Report for further information on the calculation of Operating Profit.

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Note 8: Dividends

Consolidated Group

Note 2019

$

2018

(Restated)

$

Dividends paid:

Final 2017 franked dividend of 1.40 cents per share - 363,358

Final 2018 franked dividend of 4.00 cents per share 1,038,165 -

1,038,165 363,358

a. Proposed final 2019 franked dividend of NIL cents per share 25 -

b.

(Final 2018 franked dividend of 4.00 cents per share)

Balance of franking account at year end adjusted for franking credits

arising from:

— Opening balance 7,829,912 6,834,935

— Opening balance adjustment - -

— Payment of provision for income tax 168,952 1,150,702

— Dividends recognised as receivables and franking debits arising

from payment of proposed dividends, and franking credits that

may be prevented from distribution in subsequent financial years (444,928) (155,725)

7,553,936 7,829,912

Subsequent to year end, the franking account would be reduced by the

proposed dividend reflected per (a) as follows:

- (444,928)

7,553,936 7,384,984

Tax rates

From 1 July 2018 the tax rate at which paid dividends have been franked is 27.5% (2018: 30.0%), prior to this dividends were

franked at 30.0%. Dividends proposed will be franked at the rate of 27.5% (2018: 30.0%).

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Note 9: Cash and Cash Equivalents

Consolidated Group

Note

2019 2018

(Restated)

$ $

Cash at bank* 1,579,429 1,016,005

Restricted cash** 29,086 155,283

Total Cash 22 1,608,515 1,171,288

*Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying

periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn

interest at the respective short-term deposit rates.

**Refers to cash held in the Energy Action Employee Share Trust, an entity used to manage employee equity plans as well

as cash bank guarantee held by the bank.

Note 10: Trade and Other Receivables

Consolidated Group

Note

2019 2018

(Restated)

$ $

CURRENT

Trade receivables 3,767,945 4,153,454

Provision for expected credit loss (272,062) (314,868)

Total current trade receivables 22 3,495,883 3,838,586

NON-CURRENT

Bonds and security deposits 22 86,043 91,358

a. Provision for Impairment of Receivables

Current trade and term receivables are non-interest bearing and generally on 30 to 90-day terms.

Credit risk

The Group has no significant concentration of credit risk with respect to any single counterparty or group of

counterparties other than those receivables specifically provided for and mentioned within Note 11. The class of assets

described as “trade and other receivables” is considered to be the main source of credit risk related to the Group. The following table details the Group’s trade and other receivables exposed to credit risk (prior to collateral and other

credit enhancements) with ageing analysis and impairment provided for thereon. Amounts are considered as “past due”

when the debt has not been settled, with the terms and conditions agreed between the Group and the customer or

counterparty to the transaction.

The Group policy stipulates that the receivable accounts with an administrator appointed or in liquidation or with 90

days+ outstanding – fully (100%) provided for except where a reasonable estimate can be made of the recoverable

amount. Accounts assigned to a debt collector – 50% provided. Direct customers – expected credit loss (ECL) model

based on risk associated with different ageing bucket. Retailers and Metering companies – no provision required,

historical evidence shows immaterial write-off of debt. Partially due to the pre-approval process for many of the

retailers which results in the amounts validated prior to invoicing. Disputed amounts owing which are in the process of

litigation will be provided for on a case by case basis depending on the probability of recovery.

ECL rates are applied to gross receivable balances after adjusting for any specific bad debts.

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Note 10: Trade and Other Receivables (Continued)

Past due but not impaired (days overdue)

Within

Total Trade Terms < 30 31–60 61–90 91+

$ $ $ $ $ $

2019

Trade and term receivables 3,767,945 2,385,864 675,104 145,667 193,676 367,634

Expected credit loss allowance 272,062 0 4,370 11,199 9,395 247,098

3,495,883 2,385,864 670,734 134,468 184,281 120,536

2018

Trade and term receivables 4,153,454 2,969,261 783,548 60,400 8,902 331,344

Expected credit loss allowance 314,868 0 12,615 9,919 11,462 280,872

3,838,586 2,969,261 770,932 50,481 -2,560 50,472

Neither the Group nor parent entity holds any financial assets with terms that have been renegotiated, which would

otherwise be past due or impaired.

Revenue not invoiced is shown as net of provision for cancellation in Note 13.

b. Collateral Held as Security

Current trade and term receivables are non-interest bearing and generally on 30 to 90-day terms.

No collateral or security is held by the company for loans or receivables.

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Note 11: Property Plant and Equipment


2019 2018

$ $

Computer equipment:

At cost 2,026,141 1,996,467

Accumulated depreciation (1,879,857) (1,779,165)

146,284 217,302

Furniture and fittings:

At cost 1,422,999 1,640,552

Accumulated depreciation (1,312,000) (1,327,964)

110,999 312,588

Total Plant and Equipment 257,283 529,890

a. Movements in Carrying Amounts

Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of

the current financial year

Note Computer

Equipment Furniture

and Fittings Total

$ $ $

Consolidated Group:

Balance at 1 July 2017 201,503 542,770 744,273

Additions 174,261 2,840 177,101

Assets disposed (7,347) (8,370) (15,717)

Depreciation expense 5.4 (151,115) (224,652) (375,767)

Balance at 30 June 2018 217,302 312,588 529,890

Additions 65,272 57,488 122,760

Assets disposed - (93,330) (93,330)

Depreciation expense 5.4 (136,290) (102,119) (238,409)

Accelerated Depreciation 5.5 (63,628) (63,628)

Balance at 30 June 2019 146,284 110,999 257,283

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Note 12: Intangible Assets

Consolidated Group

2019

$ 2018

$

Goodwill 9,944,796 9,944,796

Accumulated amortisation - goodwill (9,944,796) -

Net carrying value – goodwill - 9,944,796

Customer relationships 2,438,000 2,438,000

Accumulated amortisation – customer relationship (2,438,000) (1,270,910)

Net carrying value – customer relationships - 1,167,090

Software development costs 10,841,063 9,219,150

Impairment of software (1,250,000) -

Accumulated amortisation (6,326,640) (5,260,037)

Net carrying value – software development costs 3,264,423 3,959,113

Total intangibles 3,264,423 15,070,999

Goodwill Customer

relationships

Software Development

costs

Total Intangibles

$ $ $ $

Consolidated Group:

Year ended 30 June 2017

Balance at the beginning of year 9,944,796 1,406,174 3,312,004 14,662,974

Internal development - - 1,567,339 1,567,339

G/(L) on Disposal - - - -

Amortisation charge 5.4 - (239,084) (920,230) (1,159,314)

Closing value at 30 June 2018 9,944,796 1,167,090 3,959,113 15,070,999

Year ended 30 June 2018

Balance at the beginning of year 9,944,796 1,167,090 3,959,113 15,070,999

Internal development - - 1,728,212 1,728,212

G/(L) on Disposal - - - -

Impairment (9,944,796) - (1,250,000) (11,194,796)

Amortisation charge 5.4 - - (676,232) (676,232)

One-off Accelerated Amortisation 5.5 - (1,167,090) (496,671) (1,663,761)

Closing value at 30 June 2019 - - 3,264,423 3,264,423

Intangible assets, excluding goodwill, have finite useful lives. The current amortisation charges for intangible assets are

included under depreciation and amortisation expense in the statement of comprehensive income.

Refer to Note 2 for capitalisation policy.

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Note 12: Intangible Assets (continued)

12 (a) Impairment testing of goodwill and other intangible assets

For the year ended 30 June 2019, Goodwill acquired through business combinations with indefinite lives has been allocated to one Cash Generating Unit (CGU).

Energy Action has one reportable operating segment, being ‘the provision of electricity procurement services, CMER services, and project advisory services in Australia’. Therefore goodwill will be allocated across Energy Action’s sole operating segment.

The recoverable amount of the cash generating unit (CGU) has been determined on a value in use calculation using cash flow projections. These cash flow projections have been based on a forecast for the next two years. This has then been extrapolated for a further 3 years.

The discount rate applied to cash flow projections is a 17.6% post tax, 24.3% pre-tax (FY18: 13.2% post tax, 9.69% pre-tax) and the cash flows beyond the next two calendar year forecasts are extrapolated using 0% growth rate (FY18: 1%) and terminal growth rate of nil (FY18: nil).

The increase in the discount rate is due to an additional risk premium as a result of the decreased profitability during the year and associated business risk.

A detailed analysis and formal testing was performed as at 31 December 2018. With indicators of impairment during the reporting period, the Company undertook a formal assessment of goodwill. The impairment of goodwill resulted in an impairment of 100% of goodwill to the value of $9.94 million. The balance of goodwill as at 30 June 2019 is NIL. In addition, a formal testing was performed as at 30 June 2019, with indicators of impairment, resulting in an impairment to other intangible assets to the value of $1.25 million.

12 (b) Accelerate amortisation

For the year ended 30 June 2019, the company has assessed the useful life of Customer Relationships and Software Development costs. Due to the loss of significant customers, the Company has revisited the expected useful life of customer relationships to 30 June 2019. With Business Transformation Program (BTP) expected to be in use from the next financial year, the expected useful life of Enact related assets was reduced to finish at 30 June 2019.

This has resulted in the accelerated of Customer Relationship amortisation and specific Software Development depreciation until the 30 June 2019.

Note 13: Other Assets

Consolidated Group

2019

2018 (Restated)

$ $

CURRENT

Prepayments 271,199 937,365

Work in progress* 948,836 865,241

Revenue not invoiced* 3,243,102 4,111,610

4,463,137 5,914,216

NON CURRENT

Revenue not invoiced* 2,935,228 3,289,971

2,935,228 3,289,971

* These represents conditional contract asset as on 30 June 2019. (Note 3)

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Note 14: Trade and Other Payables

Consolidated Group

2019

2018 (Restated)

$ $

CURRENT

Unsecured liabilities:

Trade payables 695,339 559,164

Other payables and accrued expenses 1,836,506 2,047,343

2,531,845 2,606,507

a. Financial liabilities at amortised cost classified as trade and other payables

Trade and other payables:

- Total current 2,914,550 2,606,507

Financial liabilities as trade and other payables 22 2,914,550 2,606,507

Terms and conditions of the above financial liabilities:

– Trade payables are non-interest bearing and are normally settled on 30 or 60 day terms

– Other payables are non-interest bearing and have an average term of six months

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Note 15: Tax

Consolidated Group

Note

2019 2018

(Restated)

$ $

CURRENT

Income tax asset 22 74,638 56,738

NON-CURRENT

Opening Balance

AASB 15 & Sales

Commission

Expense FY17

Adjusted Opening Balance

Tax rate change

True-up to Tax Return

Charge to Income

Closing Balance

$ $ $ $

Consolidated Group

Deferred Tax 2019

Provisions 710,018 - 710,018 (58,288) (10,564) (147,180) 493,986

Accruals 390,473 - 390,473 (32,539) - (75,311) 282,623

Fixed assets (118,675) - (118,675) 9,890 - 488,029 379,244


(350,127) -

(350,127) 29,177 - 320,950 -

Prepaid commissions

(54,153) -

(54,153) 41 53,658 (17,925) (18,379)

Work in progress (259,554) - (259,554) 21,630 - 3,737 (234,187)

Share Based Payments

15,932 -

15,932 (1,328) - (13,656) 948

Sundry - - - - - 48,399 48,399

Revenue not invoiced

(2,405,130) -

(2,405,130) 200,428 - 383,924 (1,820,778)

(2,071,216) - (2,071,216) 169,011 43,094 990,966 (868,145)

Deferred Tax 2018

Provisions 590,087 27,943 618,030 - - 91,986 710,018

Accruals 214,869 39,485 254,354 - - 136,119 390,473

Fixed assets (257,607) - (257,607) - - 138,932 (118,675)


(421,852) - (421,852) - -

71,725 (350,127)

Prepaid commissions

(341,232) 422,820 81,588 - -

(135,740) (54,153)

Work in progress (176,498) - (176,498) - - (83,056) (259,554)

Share Based Payments

19,894 - 19,894 - -

(3,962) 15,932

Sundry - - - - - - -

Revenue not invoiced

- (1,945,696) (1,945,696) - -

(459434) (2,405,130)

(372,339) (1,455,447) (1,827,786) - - (243,430) (2,071,216)

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Note 16: Provisions and other liabilities

Analysis of total provisions

Consolidated Group

Note 2019

$

2018

$

Current

Restructuring Provision 382,705 -

Annual leave 588,084 758,605

Long service leave 197,738 242,232

1,168,528 1,000,837

Non-current

Long service leave

234,402

354,256

234,402 354,256

Provision for Long-term Employee Benefits

A provision has been recognised for employee entitlements relating to long service leave. In calculating the present value of

future cash flows in respect of long service leave, the probability of long service leave being taken is based on historical data.

The measurement and recognition criteria relating to employee benefits have been included in Note 2.

Note 17: Loans and Borrowings

Consolidated Group

Note 2019

$

2018

$

Market Rate Loan Facility (FY18: Multi-Option Facility Agreement) 5,723,721 5,100,000

Less capitalised debt establishment fees (35,250) (102,775)

22 5,688,471 4,997,225

Energy Action entered into a total loan commitment of $9.55 million with the CBA on 8 May 2019, including a market rate

loan facility of $9 million, bank guarantee facility of $0.3 million and corporate card facility of $0.25 million. The facility was

extended during the year for a two year term expiring 29 September 2021. This facility was reduced from the previous $12.0

million facility limit at the request of Energy Action, decreasing liquidity by $2.8 million.

As at 30 June 2019, Energy Action had utilised $5.7 million of market rate loan and $0.238 million bank guarantees. The

carrying value of the loans and borrowings materially approximate fair value. Funds advanced under the facility are secured

by a charge over the assets of the Group, and includes Interest Cover and Gearing ratios.

Utilisation of the facility is summarised in the following table:

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Note 17: Loans & Borrowings (Continued)

Financing facilities

Consolidated Group

2019

$

2018

$

Loan facilities (excluding corporate card facility) 9,300,000 12,000,000

Amounts utilised

Borrowings

Bank guarantees – non cash

5,723,721

237,667

5,100,000

189,617

Total amounts utilised 5,961,388 5,289,617

Total amounts unutilised 3,338,612 6,710,383

Note 18: Issued Capital and Reserves

Consolidated Group

2019

$ 2018

$

Fully paid ordinary shares 6,537,906 6,537,906

6,537,906 6,537,906

Consolidated Group

2019

No. 2018

No.

a. Ordinary Shares (number)

At the beginning of the reporting period: 25,954,117 25,954,117

Movement in the year: - -

At the end of the reporting period 25,954,117 25,954,117

Consolidated Group

2019

$ 2018

$

b. Ordinary Shares ($)

At the beginning of the reporting period: 6,537,906 6,537,906

Movement in the year - -

At the end of the reporting period 6,537,906 6,537,906

Ordinary shares participate in dividends and the proceeds on winding-up of the parent entity in proportion to the number

of shares held.

At the shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder

has one vote on a show of hands.

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Note 18: Issued Capital and Reserves (Continued)

c. Share based payments reserve

Share-based payment transactions:

The share-based payment reserve is used to recognise the value of equity-settled share-based payment provided to employees.

On 12 March 2018, 592,707 performance rights were granted to senior executives and certain other employees under the Performance Rights & Options Plan (PROP). Vesting only occurs when and if service and performance conditions are met.

The service condition is such that the employee must be employed by Energy Action at the time any performance rights vest.

The Performance Conditions comprise two tests, the Earnings per Share (EPS) and Total Shareholder Return (TSR) tests, which are described below.

The number of Performance Rights allocated to an individual which may vest will be determined by reference to:

an Earnings Per Share (EPS) component achieved by comparing the Company’s Actual Operating EPS for the year

ending on the relevant test date to the Company’s Budget Operating EPS for the year ending on the relevant test

date (Target 1); and

a Total Shareholder Return (TSR) component achieved by comparing the Company’s total compounded return to

the total compounded return of the S&P/ASX300 (Index) for the year ending on the relevant test date (Target 2).

75% of Performance Rights

Earnings Per Share Target (EPS)

(“Target 1 Entitlement”)

25% of Performance Rights

Total Shareholder Return (TSR) (“Target 2

Entitlement”)

Target 1 Available Performance

Rights

Target 2 Available Performance

Rights

Actual Operating EPS LESS THAN 94.9 % of

Budget Operating EPS

Nil Company Total

Compounded TSR LESS

THAN Total Compounded

TSR of the Index

0%

Actual Operating EPS EQUALS 95% of Budget

Operating EPS

50% Company Total

Compounded TSR EQUALS

Total Compounded TSR of

the Index

50%

Actual Operating EPS EQUALS (OR GREATER

THAN) Budget Operating EPS

Vesting will occur on a linear basis

between 50% and up to a maximum of

100%

Company Total

Compounded TSR

BETWEEN EQUAL TO AND

1.10 TIMES Total

Compounded TSR of the

Index

Vesting will occur on a

linear basis between 50%

and 100%

Company Total

Compounded TSR 1.10

TIMES Total Compounded

TSR of the Index

100%

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Awards have been granted with a 3 year vesting period ending 30 June 2020. The details and fair values of performance

rights granted during the year was as follows:

EPS $ TSR $

3 Year 0.6693 0.3244

A Monte Carlo simulation valuation technique has been adopted to value the performance rights at grant date. The fair value of performance rights granted during the year ended 30 June 2018 was estimated on the date of grant using the following assumptions:

Dividends FY18 1.40 cents, 10% pa growth thereafter

Expected volatility (%) 50

Risk-free interest rate (%) 1.98% (2 year), 2.08% (3 year)

Share price ($) 0.685

For the year ended 30 June 2019, the Group has recognised ($93,759) of share-based payment expense in the statement of comprehensive income (30 June 2018: $82,457). Share based payments expense is net of reversals due to non-achievement of targets (EPS targets) and forfeitures in the case of terminated employees.

Consolidated Group

Share Based Payment Reserve Note 2019 2018

$ $

at the beginning of the reporting period 318,226 262,768

Share based payment expenses (93,759) 82,457

Employee shares - 111,109

PROP payment (53,634) -

Transfer cash to Employee Shared Trust - (138,108)

Movement in the year (147,393) 55,458

At the end of the reporting period 170,833 318,226

d. Foreign currency translation reserve

Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation

reserve, as described in Note 2. The reserve is recognised in profit or loss when the net investment is disposed of.

Consolidated Group

Foreign Currency Translation Reserve Note 0 0

$ $

at the beginning of the reporting period (39,810) (37,437)

Foreign currency translation reserve write off 39,641 -

Foreign currency translation entry (current period) 1,599 (2,373)

Movement in the year 41,240 (2,373)

At the end of the reporting period 1,430 (39,810)

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e. Capital Management

The Group’s capital includes ordinary share capital. Management controls the capital of the Group in order to maintain a

prudent debt to equity ratio, provide the shareholders with adequate returns and ensure that the Group can fund its

operations and continue as a going concern. This includes adjusting dividend payments to shareholders and equity

attributable to the entity holders of the parent.

There is an externally imposed capital requirement of $50,000 to be held in cash, as a requirement of holding an Australian

Financial Services Licence.

The way management controls Group’s capital is by assessing the Group’s financial risks and adjusting its capital structure

in response to changes in those risks and in the market. The responses include the management of debt levels,

distributions to shareholders and share issues.

f. Interest Rate Hedging Reserve

Exposure to interest rate risk arises on financial assets recognised at reporting date whereby a future change in interest

rates will affect future cash flows or the fair value of fixed rate financial instruments. The Group’s exposure to the risk of

changes in market interest rates relates primarily to the Group’s borrowings balances with floating interest rates. Interest

rate risk is managed using a mix of terms on the bank borrowings and the interest rate swap hedging instrument.

To protect against adverse interest rate movement, the Group has entered into an interest rate swap transaction for up to

a maximum of $5 million to fix at an effective interest rate of 3.38% on the first $5 million for the balance of the Market

Rate Loan Facility Agreement. Interest rate swap transaction of $5 million expiring 1 October 2019.

At the end of each reporting period, the Group assesses the hedge effectiveness between hedged item and hedging

instrument to determine whether the risk management objective for the hedging relationship has changed as described in

note 2. For the year ended 30 June 2019, the interest rate hedging reserve was $9,610 (FY18: $7,567)

Consolidated Group

Interest Rate Hedging Reserve Note 0 0

$ $

at the beginning of the reporting period (7,567) (24,165)

Interest rate hedging entry (reverse prior period) 7,567 24,165

Interest rate hedging entry (current period) (9,610) (7,567)

Movement in the year (2,043) 16,598

At the end of the reporting period (9,610) (7,567)

There have been no changes in the strategy adopted by management to control the capital of the Group since the prior

year. The Group includes within net debt, trade and other payables including provision for income tax, less cash and cash

equivalents. Bank guarantees are excluded from this calculation. The gearing ratios for the year ended 30 June 2019 and 30

June 2018 are as follows:

Consolidated Group

Note 2019

2018 (Restated)

$ $

Bank loans 17 5,688,471 4,997,225

Less cash and cash equivalents 9 (1,608,515) (1,171,288)

Net debt / (cash) 4,079,956 3,825,937

Total Equity 5,693,759 18,933,005

Gearing percentage (%) 72% 20%

Gearing as measured by total net debt divided by total equity was 72% as at 30 June 2019 and 20% at 30 June 2018.

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Note 19: Capital and Leasing Commitments

Consolidated Group

Note 2019

$

2018

$

a. Operating Lease Commitments

Non-cancellable property operating leases contracted for but not

recognised in the financial statements

Payable – minimum lease payments:

– not later than 12 months 668,864 788,726

– between 12 months and 5 years 796,787 1,467,507

1,465,651 2,256,233

The property leases are non-cancellable leases with a maximum 5 year term with rent payable monthly in advance.

Contingent rental provisions within the lease agreement require the minimum lease payments shall be increased by the

lower of CPI or between 4-5% per annum. An option exists to renew a number of leases at the end of the term for a

maximum of five years.

The Group has provided the following bank guarantees at 30 June 2019 for regional offices:

Consolidated Group

Note 2019

$

2018

$

– Parramatta office 145,347 97,297

– Sydney office - 126,210

– Brisbane office 31,323 31,323

– Melbourne office 19,250 19,250

195,920 274,080

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Note 20: Cash Flow Information

Consolidated Group

2019

2018 (Restated)

$ $

a. Reconciliation of Cash Flow from Operations with Profit after Income Tax

Profit after income tax (12,092,885) 3,260,674

– Depreciation and amortisation 2,642,030 1,535,080

– Share based payments expense (147,392) 55,458

– Amortisation of borrowing costs 68,875 -

– Impairment of goodwill 9,944,796 -

– Impairment of software 1,250,000 -

– Strategic review 93,274 -

– Restructuring costs 520,145 -

- Restructuring Asset write off 93,331 -

Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries:

– (increase)/decrease in trade and term receivables 1,888,584 2,153,828 – (increase)/decrease in prepayments and other assets 265,254 (820,667) – increase/(decrease) in trade payables and accruals (290,393) (764,400) – increase/(decrease) in deferred taxes (1,220,971) 187,569 – increase/(decrease) in provisions (312,005) (334,236)

Cash flow from operations 2,702,643 5,273,306

b. Reconciliation of liabilities arising from financing activities

Non-cash changes

Total liability from financing activities

Opening Balance

Cash flow Acquisition Foreign

exchange movement

Fair value changes

Closing Balance

$ $ $ $ $ $

FY19

Long term borrowings 5,100,000 623,721 - - - 5,723,721

FY18

Long term borrowings 9,200,000 (4,100,000) - - - 5,100,000

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Note 21: Related Party Disclosures

The financial statements include the financial statements of the Group and the subsidiaries listed in the following table:

a. Controlled Entities Consolidated Country of Incorporation Percentage Owned (%)*

Subsidiaries of Energy Action Limited: 2019 2018

Eactive Consulting Pty Limited Australia 100% 100%

Energy Action (Australia) Pty Limited Australia 100% 100%

EAIP Pty Limited Australia 100% 100%

ACN 087 790 770 Pty Limited Australia 100% 100%

Exergy Holdings Pty Limited Australia 100% 100%

Exergy Australia Pty Limited Australia 100% 100%

Exergy New Zealand Limited

Energy Advice Pty Ltd

New Zealand

Australia

100%

100%

100%

100%

Employee Share Trust Australia 100% 100%

* Percentage of voting power is in proportion to ownership

b. The Group’s main related parties are as follows:

i. Key management personnel:

Any person(s) having authority and responsibility for planning, directing and controlling the activities of

the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity, are

considered key management personnel.

For details of disclosures relating to key management personnel, refer to the Remuneration Report

contained in the Director’s Report.

Share based payment expense reversal of $71,314 related to KMP’s

ii. Other related parties:

Other related parties include entities controlled by the ultimate parent entity and entities over which key

management personnel exercise significant influence.

The Group procures recruitment services on an arms-length basis from Derwent Executive, Murray Bleach

is no longer a member of the Advisory Board of Derwent Executive from 18 October 2018. Nil amount was

paid in FY19 (FY18 $22,000)

Nitin Singhi is a consultant of Horizon Services Trust, which was paid $116,875 in FY19 (FY18 nil). Horizon

Services Trust provided consulting services in relation to the strategic review, the renegotiation of the

banking facility and the PAS repositioning, and introduction of new partners.

c. Compensation of Key Management Personnel (KMP)

Refer to the Remuneration Report contained in the Director’s Report for details of the remuneration paid or payable to

each member of the Group’s key management personnel for the year ended 30 June 2019.

The totals of remuneration paid to KMP of the Group during the year are as follows:

Consolidated Group

2019

$

2018

$

Short-term employee benefits 1,282,966 1,008,561

Long-term employee benefits 251,032 -

Share based payments - 5,709

Post-employment benefits – superannuation 105,272 67,425

Total Compensation 1,639,270 1,081,695

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Note 21: Related Party Disclosures (Continued)

The amounts disclosed in the table are the amounts recognised as an expense during the reporting period relating to KMP.

d.

The ultimate parent

Energy Action Limited is the ultimate parent based and listed in Australia.

Note 22: Financial Risk Management

The Group’s principal financial liabilities comprise borrowings, trade and other payables. The main purpose of these

financial liabilities is to finance the Group’s operations. The Group has trade and other receivables, and cash and short-

term deposits that arrive directly from its operations.

The totals for each category of financial instruments, measured in accordance with AASB 9 as detailed in the accounting

policies to these financial statements, are as follows:

Consolidated Group

Note 2019

2018 (Restated)

$ $

Financial assets

Cash and cash equivalents, including restricted cash 9 1,608,515 1,171,288

Receivables 10 3,495,883 3,838,586

Bond and security deposits 10 86,043 91,358

Revenue not invoiced 13 6,178,330 7,401,581

Total financial assets 11,368,771 12,502,813

Financial liabilities

Loans and Borrowings 17 5,688,471 4,997,225

Trade & Other payables 14 2,914,550 2,606,507

Total financial liabilities 8,603,021 7,603,732

Financial Risk Management Policies

The Audit and Risk Management Committee (ARMC) has been delegated responsibility by the Board of Directors for,

amongst other matters, monitoring and managing financial risk exposures of the Group. The ARMC monitors the Group’s

financial risk management policies and exposures and approves financial transactions within the scope of its authority. It

also reviews the effectiveness of internal controls relating to financing risk and interest rate risk. The ARMC meets at least

three times a year and minutes of the ARMC are reviewed by the Board.

The ARMC’s overall risk management strategy seeks to assist the consolidated group in meeting its financial targets, while

minimising potential adverse effects on financial performance. Its functions include the review of the credit risk policies

and future cash flow requirements.

Specific Financial Risk Exposures and Management

The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk and market risk

consisting of interest rate risk.

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Note 22: Financial Risk Management (Continued)

a. Credit Risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or

customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating

activities (primarily for trade receivables) and from its financing activities, including deposits with banks

and financial institutions, and other financial instruments.

Credit risk is managed through the maintenance of procedures (such procedures include the utilisation

of systems for the approval, granting and renewal of credit limits, regular monitoring of exposures

against such limits and monitoring of the financial stability of significant customers and counterparties),

ensuring to the extent possible, that customers and counterparties to transactions are of sound credit

worthiness. Such monitoring is used in assessing receivables for impairment. Credit terms are generally

30 to 90 days from the invoice date.

Risk is also minimised through investing surplus funds in financial institutions that maintain a high credit

rating. The institutions selected are determined by the Board.

The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting

period excluding the value of any collateral or other security held, is equivalent to the carrying value and

classification of those financial assets (net of any provisions) as presented in the statement of financial

position.

The Group has no significant concentrations of credit risk with any single counterparty or group of

counterparties. Details with respect to credit risk of trade and other receivables are provided in Note

10.

Trade and other receivables that are neither past due nor impaired are considered to be of high credit

quality. Aggregates of such amounts are as detailed in Note 10.

b. Liquidity risk

Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts

or otherwise meeting its obligations related to financial liabilities. The Group manages this risk

through the following mechanisms:

– preparing forward looking cash flow analysis in relation to its operational, investing and financing

activities;

– obtaining funding from a variety of sources;

– maintaining a reputable credit profile;

– managing credit risk related to financial assets;

– only investing surplus cash with major financial institutions; and

– comparing the maturity profile of financial liabilities with the realisation profile of financial

assets

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Note 22: Financial Risk Management (continued)

Within 1 Year 1 to 5 years Over 5 years Total

2019 2018 2019 2018 2019 2018 2019 2018

(Restated)

Consolidated Group $ $ $ $ $ $ $ $

Financial liabilities due for payment

Bank loans 50,573 49,223 5,688,471 4,997,225 - - 5,739,044 5,046,448

Trade and other payables (excluding est. annual leave)

2,531,845 2,606,507 - - - - 2,531,845 2,606,507

Total expected outflows

2,582,418 2,655,730 5,688,471 4,997,225 - - 8,270,889 7,652,955

Financial assets — cash flows realisable

Cash and cash equivalents

1,579,429 1,016,005 - - - - 1,579,429 1,016,005

Restricted cash 29,086 155,283 - - - - 29,086 155,283

Trade, term and loans receivables

3,495,883 3,838,586 - - - - 3,495,883 3,838,586

Work in progress 948,836 865,241 - - - - 948,836 865,241

Bonds and security deposits

- - 86,043 91,358 - - 86,043 91,358

Revenue not invoiced 3,243,102 4,111,610 2,935,228 3,289,971 - - 6,178,330 7,401,581

Total anticipated inflows

9,296,336 9,986,725 3,021,271 3,381,329 - - 12,317,607 13,368,054

Net (outflow)/inflow on financial instruments

6,713,918 7,330,995 (2,667,200) (1,615,896) - - 4,046,718 5,715,099

b. Interest rate risk

Interest rate risk arises as a result of changes in market interest rates and will affect the future cash flows. The Group

manages its interest rate risk by having a variety of loan rollover terms from 30 days to 180 days and hedging $5 million of

loan amounts via an interest rate swap. Cash and cash equivalents are all on short term deposits. As at 30 June 2019, the

Group had bank loans of $5.7 million comprising of $0.7 million on 90 day terms at 2.74% and $5.0 million on 3.38% fixed

interest expiring on 1 October 2019. At the end of each reporting period, the Group assesses the hedge effectiveness

between hedged item and hedging instrument to determine whether the risk management objective for the hedging

relationship has changed. The interest rate hedge effectiveness was assessed as at 30 June 2019, $10k was recognised in

interest rate reserve in the balance sheet (30 June 2018: $8k). As at 30 June 2018, the Group had bank loans of $5.1 million

comprising of $0.1 million on 30 day terms at 3.24% and $5.0 million on 3.38% fixed interest for 1.25 years.

d. Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in

market prices. Market prices for Energy Action Limited comprise interest rate risk. Financial instruments affected by

interest risk include cash at bank.

i. Interest Rate Risk

Exposure to interest rate risk arises on financial assets recognised at reporting date whereby a future change in interest

rates will affect future cash flows or the fair value of fixed rate financial instruments. The Group’s exposure to the risk

of changes in market interest rates relates primarily to the Group’s borrowings balances with floating interest rates net

of cash.

Interest rate risk is managed using a mix of terms on the bank borrowings and the interest rate swap referred to in

Note 23(c) above. The company has insignificant other balances that have interest payment terms.

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Note 22: Financial Risk Management (continued)

ii. Sensitivity Analysis

The following table illustrates sensitivities to the Group’s exposures to changes in interest rates. The table indicates

the impact on how profit and equity values reported at balance date would have been affected by changes in the

relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the

movement in a particular variable is independent of other variables, and the other assumptions remain consistent

with prior years.

Consolidated Group

Increase/decrease in

basis points

Profit before tax

$ $

Year ended 30 June 2019 +/- 100 -/+ 56,495

Year ended 30 June 2018 +/- 100 -/+ 73,390

The assumed movement in basis points for the interest rate sensitivity analysis is based on currently observable

market environment, showing a significantly lower volatility than in prior years.

Fair Values

Fair value estimation

The carrying value of financial assets and financial liabilities is materially the same as the fair value.

The fair values of the following financial assets and liabilities have been determined based on the following methodologies

and assumptions:

(i) Cash and cash equivalents, trade and other receivables and trade and other payables are short-term instruments whose carrying value are deemed to be equivalent to fair value. Trade and other payables exclude amounts provided for relating to annual leave which is not considered a financial instrument.

(ii) Term receivables generally reprice to a market interest rate every 6 months, and fair value therefore approximates carrying value.

(iii) Bank borrowings entered into an interest rates swap hedging instrument, fair value assessment every 6 months

Financial liabilities are classified into Levels:

Level 1 those items traded with quoted prices in active markets for identical liabilities

Level 2 those items with significantly observable inputs other than quoted process in active markets

Level 3 those with unobservable inputs

Fair Values FY19

FY18

Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

Financial Liabilities

Bank loans 5,688,471 - - 4,997,225 - -

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Note 23: Auditors’ Remuneration

Consolidated Group

2019

$

2018

$

The auditor for Energy Action Limited is Ernst & Young

Amounts received or due and receivable by Ernst & Young (Australia) for:

— An audit or review of the financial report of the entity and any other

entity in the consolidated group

208,400 146,965

— Other services in relation to the entity and any other entity in the

consolidated group

- 13,500

208,400 163,400

Note 24: Information relating to Energy Action Limited (“the parent entity”)

The following information has been extracted from the books and records of the parent and has been prepared in

accordance with Accounting Standards.

Parent

Note 2019

2018 (Restated)

$ $

STATEMENT OF FINANCIAL POSITION

ASSETS

Current assets 16,600,039 14,455,480

Non-current assets 3,448,650 14,560,537

Total assets 20,048,689 29,016,017

Current liabilities (10,422,300) (10,118,695)

Non-current liabilities (7,471,939) (8,008,194)

Total liabilities (17,894,239) (18,126,890)

Issued capital (8,005,600) (8,005,600)

Retained earnings 5,851,149 (2,883,528)

Total Equity 2,154,450 10,889,127

Profit of the parent entity 3,539,746 (8,045,708)

Total comprehensive income of the parent entity

3,539,746 (8,045,708)

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Note 25: Events After the reporting period

No other matters or circumstances have arisen since the end of the financial year which significantly affected or could

significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of

the consolidated group in future financial years.

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Director’s Declaration

In accordance with a resolution of the Directors of Energy Action Limited, I state that:

1. In the opinion of the Directors:

a. The financial statements and notes of Energy Action Limited for the financial year ended 30 June 2019 are

in accordance with the Corporations Act 2001, including:

i. giving a true and fair view of its financial position as at 30 June 2019 and performance

ii. complying with Accounting Standards (including the Australian Accounting Interpretations)

and the Corporations Regulations 2001

b. The financial statements and notes also comply with International Financial Reporting Standards as

disclosed in Note 2.1

c. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they

become due and payable

2. This declaration has been made after receiving the declarations required to be made to the Directors in

accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2019.

On behalf of the board

Murray Bleach

Director

28 August 2019

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anna.sandham

Murray Bleach

75

Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001

Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au

Independent Auditor's Report to the Members of Energy Action Limited

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Energy Action Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration.

In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:

a) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2019 and of its consolidated financial performance for the year ended on that date; and

b) complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report.

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Carrying value of intangible assets

Why significant How our audit addressed the key audit matter

As required by Australian Accounting Standards,

the Group performs an annual impairment

assessment of its goodwill balances.

Other intangible assets comprise customer

relationships and capitalised system development

costs which were assessed by the Group for

indicators of impairment. If indicators of

impairment exist during the year, an impairment

test for these assets is also performed.

During the year the Group has recognised

impairment of $9.94 million and $1.25 million in

respect of the Goodwill and other intangible assets

balances, respectively.

The carrying value of intangible assets was

considered to be a key audit matter due to the

magnitude of the balance in the consolidated

statement of financial position and the significant

judgments and assumptions involved in the

assessment of indicators of impairment and

impairment tests.

Refer to Note 12 of the financial report for the

related disclosures.

Our audit procedures included the following:

• Assessing the Group’s determination of the

appropriate Cash Generating Units (CGU).

• Evaluating the Group’s assessment of indicators

of impairment for the other intangible assets.

• For the impairment test performed, assessing

the appropriateness of the board approved cash

flow forecast and assumptions therein, including

performing a sensitivity analysis of key

assumptions and evaluating whether a

reasonably possible change in assumptions could

result in an impairment of the carrying value of

the assets.

• We considered the historical accuracy of the

Group’s cash flow forecasts against actual cash

performance in recent years.

• We tested the mathematical integrity of the

impairment model.

• Considered the adequacy of the financial report

disclosures contained in Note 12 of the financial

report.

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Recognition of revenue

Why significant How our audit addressed the key audit matter

AASB 15 Revenue from Contracts with Customers

is the new Australian Accounting Standard relating

to revenue recognition and became effective for

the Group from 1 July.

Under AASB 15, revenue from procurement

activities relating to commission based tenders of

the Group is recognised in the period in which the

procurement activity is undertaken. This

treatment is different to that previously applied by

the Group and has resulted in a $3.4 million

transitional adjustment impacting the opening

retained earnings disclosed in note 2.2(i) of the

financial report.

The Group generates revenue from projects that

may cross multiple financial periods. For such

contracts, AASB 15 requires the Group to

recognise revenue over the period of time as and

when customers receive and consume the benefits

resulting from the satisfaction of underlying

performance obligations identified within the

contracts.

The contracting terms used can vary significantly

between contracts and involve judgment in the

recognition of revenue and valuation of work in

progress. As a result, this was a key audit matter.

Refer to Note 2(m) within the financial report for a

summary of the Group’s policy.

Our procedures included the following:

• Assessing whether the Group’s revenue

recognition policy is in line with the requirements

of the new revenue recognition standard.

• Selecting a sample of contracts to determine

whether revenue was recognised in accordance

with the contract terms and the Group’s revenue

recognition policies.

• Assessing the appropriateness of the estimated

project costs for significant projects through

discussions with project managers and obtaining

a sample of project questionnaires. These

questionnaires which include a project status

update and costs to complete analysis for the

respective contract and support the estimate of

the percentage of completion.

• Assessing the recoverability of work in progress for the outstanding projects through testing of subsequent billings and cash receipts.

• We tested the mathematical accuracy of revenue

and contract profit recognised based on the

percentage of completion for all contracts.

• In testing the transition to the new accounting

standard:

o We obtained an understanding of the Group’s

process for implementing AASB 15.

o We selected key contracts with the

customers on a sample basis and reviewed

them to ensure that the application of the

policy is in line with the requirements of

AASB 15.

o We tested the completeness of the

population of contracts included in the

transition adjustment.

o Tested the mathematical accuracy of

transition adjustments.

• Considered the adequacy of the disclosures

contained within Notes 2.2(i) and 5 of the

financial report.

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Information Other than the Financial Statements and Auditor’s Report

The directors are responsible for the other information. The other information comprises the information included in the Group's 2019 Annual Report other than the financial report and our auditor's report thereon. We obtained the Directors' Report that is to be included in the Annual Report, prior to the date of this auditor's report, and we expect to obtain the remaining sections of the Annual Report after the date of this auditor's report. Our opinion on the financial report does not cover the other information and we do not and will not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

Responsibilities of the Directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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Report on the Audit of the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in the directors' report for the year ended 30 June

2019.

In our opinion, the Remuneration Report of Energy Action Limited for the year ended 30 June 2019,

complies with section 300A of the Corporations Act 2001.

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the Remuneration

Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an

opinion on the Remuneration Report, based on our audit conducted in accordance with Australian

Auditing Standards.

Ernst & Young

Ryan Fisk Partner Sydney 28 August 2019

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APPENDIX 4E PRELIMINARY FINAL REPORT YEAR ENDED 30 … · 2019-08-27 · ABN 90 137 363 636 P a g e...

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